SWIFT Global Electronic Trade Confirmation Initiative: A credible alternative confirmation method

The SWIFT Global Electronic Trade Confirmation (GETC) initiative has gradually been building momentum over the last 12 months and the industry is now accepting SWIFT GETC as a credible alternative or substitute confirmation method.

Initially, some buy-side firms were seeking a complement or substitute to Omgeo CTM, exploring methods such as Omgeo CTM ACWF, pseudo block, and migration to a block/allocation model.  Firms that were capable of migrating to block/allocation chose to do so. However, for some firms, this was impractical because of the way their funds were mandated or outsourced.  Often working practices implemented by local markets prevented the firm from doing so or in some cases the front office resisted the move.

Cost control has been a key driver for this move. The cost per message is lower than other methodologies.  Additionally, the organisation may already be on a high-level SWIFT pricing tier, leaving the incremental cost of sending additional SWIFT messages low. Another factor is risk mitigation, if the primary confirmation method fails or becomes unavailable, a switch to SWIFT based messaging can be made for business continuity. In addition, leveraging existing SWIFT messaging infrastructures for post-trade confirmation will allow firms to streamline internal processes and procedures.

There are two main confirmation methods from SWIFT: the Accord Utility and the Global ETC Method. The SWIFT Accord utility is currently used for broker- to- broker and treasury confirmations, but could potentially grab a large market share of securities-matching in the future. However, the Accord Utility remains a central match model and many buy-side firms are beginning to doubt that the proposed benefits of a central match solution can actually be delivered.

The alternative is the SWIFT Global ETC method which utilises MT509, MT513, MT514, MT515 and MT517 message types to provide a full block and allocation confirmation workflow.  When coupled with the MT54x series of messages for settlement notification and tracking, these message types provide a cost effective and operationally efficient alternative to Omgeo CTM. While the allocation MT515 message can support inclusion of the broker delivery instructions, it is the job of the broker to assign these to their SWIFT confirmations.

Additionally, buy-side firms are looking to SWIFT to mitigate the risk of failed or incomplete confirmation processing. A solution which supports central match confirmation models and exceptions management workflow which can integrate seamlessly with existing settlement instruction generation capabilities can be deployed relatively easily. This allows clients to streamline their post-trade processing activities, using a robust and mature messaging infrastructure whilst retaining control of their matching environment.

Although efficient technology is a necessity, having a viable confirmation method in place is only the start. Firms will need to complement their technology with a robust, tested and appropriate business continuity plan. It is evident that the need to employ an alternative confirmation method is a priority for many financial institutions but that combined with effective BCP arrangements will position firms well to deliver tangible and immediate value to their customers.