Replacing ISO15022

The news that four of the securities industries most influential standards bodies are collaborating, would normally bring about very loud applause from me but I find myself really concerned about what the end cost might be for the market and the investors.

A few years back FIX Protocol (FPL) agreed a memorandum of understanding with SWIFT that lasted about two minutes in the whole scheme of things, as each had basic differences which are to detailed to go into in this blog. The point was it turned out pretty futile and now we have the original two protagonists joined by International Securities Association for Institutional Trade Communication (ISITC) and Financial Products Mark up Language /International Swaps and Derivatives Association (FpML/ISDA). Well at least the securities industry can prove a world leader in the longest most obscure acronyms!

My questions are will this collaboration prove successful and will its success be measured if it is and does the industry really need this group and what might the eventual cost be to financial services firms?

It's really the cost issue that concerns me as I don't think anyone would doubt the laudable objectives of this group. These being to work on producing a road map for messaging standards for the industry that culminates in a single message standard. This is intended to be ISO 20022 with XML which will not only create the possibility of a single message standard but for all financial products, across all markets. This type of horizontal solution is just what the market needs and would revolutionise the front, middle and back office communications creating internal STP and more importantly establish an industry STP benchmark.

Now here's the rub. The securities industry is a long way short of achieving saturation of ISO15022 across the global securities landscape and those that have not already invested in the message standard could be deterred!

To get ISO15022 to its present usage within the industry, has taken many years and has been extremely expensive to implement. SWIFT did a very fine job to manage the ISO15022 project and despite the expected odd blip, the securities industry all arrived at the ISO15022 station on time. This was only a short time ago and now a similar project appears to be on the horizon with ISO 20022. So can the industry stand these costs again especially at a time of the financial downturn we see today?

Jamie Shay of SWIFT is quoted as saying that financial services firms are more able to cope with multiple standards due to their investment in the required tools (I assume he means technology) which create interoperability. However, this type of technology whilst prevalent in the wholesale market is lacking in retail. The possibility exists that ISO 20022 could cause a wider chasm between retail firms and wholesale. The use of ISO15022 at the same time as ISO 20022 is being implemented will push the industry into a duopoly message standard and a two speed STP capability. This appears to be in conflict with the aims of SWIFT own policy, the new group and the industry as a whole.

I would be very interested to hear from both wholesale and retail financial services firms; what their views or plans are to change from ISO15022 to ISO20022?