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Gary Wright

Gary Wright

Gary Wright - BISS Research

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A post relating to this item from Finextra:

Standards bodies collaborate for interoperability

06 May 2008  |  9925 views  |  0
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The major financial market standards bodies have collaborated to create an 'investment roadmap' aimed at eventually establishing ISO 20022 as the common financial messaging standard, while maintaining...

Replacing ISO15022

12 May 2008  |  4620 views  |  2

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?            

TagsPost-trade & ops

Comments: (4)

Paul Penrose
Paul Penrose - Finextra - London | 12 May, 2008, 15:09 The securities industry isn't alone in struggling with a mismatch of standards and the switch to ISO20002. In the payments space, the introduction of Sepa and the PSD is causing some big problems for multinational corporations. Speaking at the annual EBAday conference in Rome last year, Gianfranco Tabasso, chairman of the European Association of Corporate Treasurers warned that if the banking industry failed to deliver on the promise of an end-to-end system for payments processing across Europe, then corporates would respond with their own alternatives based around their preferred standard of ISO20022.
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A Finextra member
A Finextra member | 12 May, 2008, 18:42

Thanks Paul

I am very concerned that despite the initiatives with various standards in payments and securities that the importance of giving the customers/clients what they want at a price which is attractive is being missed. Its all very well technology being developed and standards being implemented to provide solutions to age old market problems but the customer must be convinced of the value and that their business will benefit otherwise Gianfranco Tabasso's threat may not be an idle one!

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Matthijs Vrolijk
Matthijs Vrolijk - Capco - Brussels | 13 May, 2008, 09:51

Even amongst wholesalers, there are significant issues about cost, technology, and risk. ISO 20022 means adding another layer to the application stack, providing translation into internal formats as well as maintaining consistency with ISO15022. There is going to be a (long) period of cohabitation with the older standard - this adds complexity and risk, along with a definite cost impact.

Consequently, passing the benefits and new features of ISO20022 onto clients, and convincing them of its use, is going to be expensive in time & money.

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A Finextra member
A Finextra member | 13 May, 2008, 09:59

Thank you Matthijs for your comment and I very much agree with your analysis.

Its hard to see how the FS firms can manage this change even though I except the benefits of ISO 20022. Sometimes the cure is worse than the illness!

Anymore comments please?

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