Select Committee on Treasury Written Evidence

Memorandum submitted by SWIFT

1.  SWIFT is an industry owned co-operative supplying secure financial messaging services to more than 7,500 of the world's leading financial institutions, including central banks. SWIFT also provides secure messaging services to leading financial market infrastructures such as the inter-central bank TARGET system, CLS and many central securities depositories.

2.  In addition to its role as a trusted financial communications network, SWIFT also acts as a messaging standards body for the global financial industry and is the registration authority for key financial messaging standards approved by the independent International Organisation for Standardisation (ISO). SWIFT acts as registration authority for ISO15022, the ISO standard for financial messaging in the securities industry, and its successor ISO20022 for standardised messaging in the broader financial industry, ie payments, treasury, FX, trade etc. ISO 20022 is the single ISO approved messaging standard for the financial industry. ISO compliant messages are "open standards" that can be used, without payment of royalties, on any financial network.

3.  Both globally and within the EU, ISO20022 is the recommended solution for standardised messaging in a number of key infrastructure initiatives, such as G30 and Giovannini for harmonisation of cross-border securities clearing & settlement and Target 2 for the European Central Bank's Real Time Gross Settlement system for the Euro. ISO20022 has also been recently adopted as the messaging standard for the SEPA (Single European Payments Area) initiative.

4.  In the context of the increasing use of ISO20022 across the financial transaction lifecycle, SWIFT wishes to draw the Committee's attention to the desirability of the use of ISO20022 for key MIFID data flows, to establish a single standard that will underpin the concept of true straight through processing (STP) lowering both the cost and the risk associated with securities trading across Europe. It should be noted that SWIFT has already publicly committed to users of ISO standards in the pre-trade/trade market space, that these standards will be updated to accommodate the requirements of MiFID and will be "fit for purpose" when MiFID compliance becomes mandatory on 1 November 2007. In particular, MIFID will give rise to new and extensive flows of information to provide greater price transparency which, if costs are to be manageable, will need to be easy to consolidate and therefore a common standards approach to the format in which the information is supplied will be important. Given the need for transactions, once dealt, to then clear & settle against payment, it would seem a logical proposition to use the same standard as far as possible across the entire transaction lifecycle. ISO20022 provides the necessary linkage between the securities trading, clearing, settlement and payment processes. ISO20022 can also play an important part in helping to standardise end of day regulatory transaction reporting. For maximum efficiency and lowest cost and risk, this should be harmonised across all 25 EU States, reporting in one agreed format as opposed to 25 different proprietary formats.

5.  SWIFT would, therefore, ask the Committee to take note of the opportunities for greater efficiency afforded by the use of ISO20022 as a message standards approach for key MIFID data flows, particularly post trade price reporting and regulatory transaction reporting. We note today that no recommendations in respect of open industry messaging standards such as ISO20022 have yet been made by either the EU Commission or the regulators relating to the practical implementation of MIFID. We would very much appreciate the Committee considering this issue in its future discussions.

April 2006

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