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Standards bodies collaborate for interoperability

06 May 2008  |  10060 views  |  0 blue circuits

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 the existing independent protocols.

Both FIX Protocol (FPL) and Swift are involved in the collaboration, along with International Securities Association for Institutional Trade Communication (ISITC) and Financial Products Markup Language/International Swaps and Derivatives Association (FpML/ISDA)

They say the roadmap aims to provide market participants with a "consistent and clear direction to messaging standards usage by visually mapping the industry standard protocols FIX, ISO and FpML to the appropriate business processes across the major asset classes".

The group says the roadmap also defines an agreed path for future initiatives by identifying gaps, as well as areas of overlap. The most important aspect surrounding standards interoperability focuses on the "peering" or transition points where firms can shift from using one standard to another. This will result in higher levels of interoperability for the financial services community and will save firms the cost of maintaining multiple syntaxes within the same area of the transaction lifecycle, says the group.

Commenting on the initiative, Scott Atwell of American Century Investments, co-chair FPL global steering committee, says: "It is clear that the FIX Protocol is the de facto standard for pre-trade and trading, that FpML is the de facto standard for OTC Derivatives, and that ISO is the de facto standard for settlement. We need an approach that leverages these standards into a broader framework without reinventing and creating redundant messages that increase implementation costs and cause confusion for the industry."

Kevin Houstoun, co-chair FPL global technical committee and consultant to HSBC, says the collaboration is aimed at producing a consistent direction for financial services messaging standards and communicating that clearly.

"Over the longer term this collaboration should lead to the broad horizontal standards that the financial services industry needs if it is ever to successfully streamline its processes, automate and save our ultimate consumers money," adds Houstoun.

Karel Engelen, head of FpML, ISDA, says the roadmap also allows the financial community to better direct IT infrastructure.

Previous collaboration attempts by FPL and Swift fell through in 2005 after FPL terminated an agreement to establish the ISO 15022 XML format as a common messaging standard for securities processing.

FPL and Swift originally signed a Memorandum of Understanding (MoU) in July 2001 to explore the possible convergence of their respective messaging protocols by focusing on the development and adoption of ISO 20022 XML as a common industry standard. This would have enabled the flow of data between the front and back office operations of securities institutions. FPL said in December 2005 that adoption of FIX in the pre-trade and trade space has grown significantly since the MoU and that it would focus on driving use of its own protocol instead.

Commenting on the new initiative Jamie Shay, head of standards, Swift, says: "Most financial practitioners now recognise the challenges associated with multiple standards and are not looking to create additional standards to represent financial transactions in a new way. The financial community is able to deal more effectively with the existence of multiple standards due to the availability of tools that enable interoperability."

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