2016 Sibos Standards Forum highlights

Around 500 people attended one or more sessions of the 2016 Sibos Standards Forum, which took place from 26 to 29 September in Geneva, Switzerland. Aimed at people who were unable to attend, as well as to offer a recap to those who were there in person, here are some of the highlights per conference day, each of which was dedicated to a specific theme.

Day 1: Landscape and Roadmaps

The financial industry's landscape looks very challenging. There are many rocky roads to navigate as we will respond to new technologies, new regulations and new business models. On the opening day of our Standards Forum in Geneva, we tried to bring the landscape into focus, help attendees to define their destination and navigate through it.

Global Landscape

ISO 20022 is becoming the 'natural language' of financial services. Understanding its content and governance may be a steep learning curve but, as adopters testified, rewards are starting to become tangible and, more importantly, the risks of NOT understanding ISO 20022 are becoming increasingly understood. The ISO 20022 Harmonisation Programme, as well as related training and education, remains critical to the long-term goal of interoperability between financial communities.

Standards Roadmap

Payments – The Global Payments Innovation (GPI) initiative lays the foundations of reliable, end-to-end transparency of payments across global correspondent banking. Market infrastructures rolling out ISO 20022 now comprise many communities in Asia (such as CIPS in China) and the USA (FedPayments Improvement programme). Real-time, or instant, payment schemes are rapidly materialising around the world (NPP in Australia, SCTinst in Europe, and several Asian projects).

Securities – ISO 20022 is rapidly becoming the common language of corporate actions, T2S now captures over 50% of European settlements. ISO 20022 business standards are used as a basis for the development of blockchain technology (SWIFT's proof-of-concept focusing on the bond issuance lifecycle). The Australian Stock Exchange (ASX) is considering a solution based on Distributed Ledger Technology (DLT) powered by ISO 20022 standards to replace its clearing & settlement (CHESS) system.

Regulatory reporting – More regulators are following ESMA's lead in specifying reporting schemas using ISO 20022. The work being undertaken by Payments UK and others to produce an agreed standard API framework will benefit many other initiatives. Regulators focus on to the relationship between Legal Entity Identifier (LEI) and 'legacy' identification schemes, so that LEI can be adopted for more widespread party identification without having to rebuild vast and expensive infrastructures.

Standards bodies discuss their roadmaps

ISO/TC 68 Financial Services, the committee focusing on financial industry standards, will change its structure in 2017 to focus on reference data, information exchange, communication and security. The existing subcommittees looking after securities and payments will be dissolved. SWIFT reported a steadily increasing demand for standards input into innovation projects. It is also involved in a number of DLT proof-of-concepts. The Swiss business community shows that it wants to stay on top of its game by uniting its collective opinion-formers in the Swiss Commission for Financial Standardisation (SKSF), formed to monitor and contribute to the global standards agenda with a single voice.

Standards and regulatory reform

Financial markets are international and global by nature, the scope of the supervising authorities and the remit of regulation is generally local. The importance of standards to address the challenges of data aggregation has been recognised as standards can help harmonisation of regulatory reporting requirements. Industry participants should consult national or international regulatory bodies. In setting the requirements, regulators are looking for input and contribution from already regulated organisations.

SMPG and PMPG roadmaps

Payments Market Practice Group (PMPG) members mentioned the ongoing work on the HVPS+ market practice, their work on real-time payments, the continuing liaison with the Real-Time Payments Group (RTPG) and the rollout of ISO 20022 in corporate-to-bank and RTGS contexts, both domestically and internationally. The PMPG is also consulting the wider banking industry as to whether and how the LEI should be used as an identifier in payments messages.

Day 2: Transformation

Transformative programmes, initiatives and ideas are changing the way we organise our securities, payments and regulatory operations. On the second day of the Standards Forum, we reflected on how the world of standards should respond to this, so that our achievements and the value we created are properly used and leveraged to respond to new use cases.

The role of standards in disruption. What should we learn – or reject – from disruptors?

The Standards community is a concentration of innovators by itself. There are other communities of innovators (such as: fintech, regtech, biztech), which may be (partly) reinventing wheels that already exist in the standards world. Hence the importance to make innovators aware that business standards exist. But the same innovators also need ways of accessing, refining and enhancing standards to suit their own use cases. Likewise, the standards community needs to understand how to accommodate these new consumer communities.

Business Standards in the DLT stack

ISO 20022 contains valuable definitions of business concepts, transactions and data items that DLT needs, if it is to deliver on its early promise of enabling effective financial transactions. However, speakers commented that DLT needs to mature if it is to become a trustworthy method of executing risk-bearing financial transactions.

Standards governance and mechanisation

Market Practice documents are essential if the standards dream of global harmonisation of financial data exchange is to be realised; but they need to be managed with the same discipline as the base standard definitions from which they are derived and developed. That means, amongst other things, clear ownership of the maintenance task, and rigorous version and change management.

Day 3: Initiatives

The ISO 20022 Harmonisation Programme has delivered a widely-adopted charter, which is now moving into implementation. On day three of the Standards Forum, we heard from and discussed with leaders and visionaries who are building the harmonised global ISO 20022 user experience, from market practices to Market Infrastructures' implementation plans.

ISO 20022 Harmonisation project: theory becomes practice

Banks and other stakeholders see the benefits of harmonisation and are anxious to participate in ISO 20022 harmonisation, as soon as market infrastructures have committed to it. The prevailing sentiment expressed by the panel of speakers as well as the audience is one of urgency.

ISO 20022 Market Practice Development

Four market infrastructures (LCH, ASX, EBA and the Federal Reserve Bank of New York) reported to be at varying stages of defining or implementing their ISO 20022 message flows and market practices. All of them mentioned that the key enabler for a successful implementation was to involve all participants and stakeholders early on in the process and to clearly articulate the benefits that adoption of ISO 20022 will bring to them. LCH and ASX have already shared their guidelines on MyStandards; HVPS+ specifications will be published in 2017.

The corporate debate: banks should stop differentiating non-competitive services

Banks sometimes use variations of standards implementations to fit their own businesses. Corporates are sometimes disappointed when first confronted with payments and cash management processing. That said, there are often good reasons behind banks' different approaches, which have to do with regional variations in best practice, regulation, and items that add value to meet specific business requirements. The picture of what can be harmonised is not always clear to banks. There is a lot of enthusiasm about the GPI initiative and attendees think it will vastly improve end-to-end transparency of payments through the correspondent banking system. People believe that it will lead to a globally-consistent set of practices.

From practice to performance: ISO 20022 Implementation planning in payments and securities initiatives

Payments – Four Market Infrastructures (MIs) with very different implementation timings and project planning (ECB, EPC, Six Group and The Clearing House) showed that dependencies and connections beyond their local MI ecosystem boundaries make it a critical requirement to align and synchronise with other ISO 20022 adoption initiatives. There is a strong need for more global market practice, information sharing and discipline in adoption to ensure that inter-dependencies between different payment business models are in sync.

Securities – T2S reported to have completed an important milestone with the migration of ESES (Euroclear Settlement of Euronext-zone Securities) markets. VP Denmark, the central securities depository in Denmark, is live on the same platform. Both organisations consider that the next big topic to be to addressed will be the impact of regulation on settlement and Central Securities Depositories (CSDR). Regulatory requirements will drive further adoption of ISO 20022 across the securities value chain and asset classes.

ISO 20022: an end-to-end success story

In the UK, TISA is a cross-sector industry association that brought together investment platforms, fund managers, technology vendors and standards bodies to address the challenge of establishing a common automated transfer process. In 2013, UK regulators asked TISA to improve the user experience of moving from one fund platform to another. This led to the launch of the TISA Exchange (TeX), a utility for managing the data exchanges necessary to automate transfers, powered by ISO 20022 standard data definitions. The initiative resulted in an astonishing improvement in speed of execution of transfers, from several months to 'a few minutes'. ISO 20022 is considered a critical enabler of TISA's success, and TISA itself has become a reference model of effective collaboration.

Day 4: Standards are more than messages

On the last day of the Standards Forum, attendees explored how the standards community is rising to the challenges posed by semantic data, reference data and metadata.

Data Ethics in the internet of financial things

The audience was shown how data 'collisions' in the immature world of the Internet of Things (IoT) have already caused reasons to question its merits. At the same time, it is expected that the IoT will develop much further, as the financial world is getting increasingly interconnected across multiple channels. The standards community was praised for carrying out the work items that are already on its agenda today, and for creating bigger and better opportunities to interconnect businesses and processes.

Reference data and semantics: new challenges and solutions for standardisers

Speakers debated whether the financial industry is making the best usage of data standards. The Legal Entity Identifier (LEI) was mentioned as a good example of a new data standard that has been defined four years ago to address transaction reporting needs of financial industry participants and the regulatory community. The financial industry has so far been slow in adopting the LEI standard beyond its mandatory implementation. Regulators have done a better job in mandating usage of the LEI standard across regulatory reporting. Speakers expressed the importance to draw lessons from the public-private partnership in developing the LEI and how this experience can be applied in the implementation of other data standards, such as UTI/UPI. There's something to think about by next Sibos!

Please refer to www.sibos.com for any further information about Sibos 2016 in Geneva.