Central Securities Depositories, ISO Standards and SWIFT Automation today and for the future

Edward de Courcy-Ireland Regional Manager - Securities

4th November 2006
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Agenda
SWIFT update Securities Market Infrastructures using SWIFT ISO Standards

20061019_AECSD

Slide 2

SWIFT - September 2006

2.5 billion messages per year 7,940 customers 208 countries Average daily traffic 11.2 million messages

Peak day of 13.1 million messages, 29 Sep 2006

Availability of SWIFTNet 99.999%
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FIN Messaging Traffic Growth

FIN Growth by Market August 2006 YTD (Millions of messages) FIN Category Payments Securities 2005 YTD Actual 641 555 106 31 8 301 1,641 2006 YTD Actual 692 689 120 31 8 337 1,877 Growth from 2005 7.2% 23.2% 12.7% 1.8% -3.4% 11.3% 13.6%

Treasury
Trade Finance System

Category 9
TOTAL

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Pricing and traffic Harnessing economies of scale

Price (EURcent/msg) 50 45 40 35 30 25 20 15 10 5 0 500 1500 2000 Traffic (Millions of messages) 2500

1000

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Agenda
SWIFT update Securities Market Infrastructures using SWIFT ISO Standards

20061019_AECSD

Slide 6

Securities strategic priorities (set by the industry)

Market space
Pre-trade / Trade
Post Trade / Pre-settlement Clearing and Settlement Custody Services

Strategic priorities
Succeed in Pre trade /Trade messaging Platform of choice for Post-trade / Pre-set. Be the messaging platform of choice for market infrastructures

Equity and fixed income

Grow traffic in Clearing and Settlement and Custody services

Drive Industry towards Standards convergence

Investment funds
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Become messaging platform of choice for the Funds industry

Slide 7

A world without SWIFT Different Standards, Messaging & Connectivity

User Market Infrastructures

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Single Window from SWIFT Reusing Standards, Messaging and Connectivity

User Market Infrastructures

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Securities Market Infrastructures Outsource Messaging & Network

Infrastructure has full vertical implementation Infrastructure outsources Physical network Infrastructure outsources Messaging & network
Focusing on core values

Messaging Mechanisms

Messaging Mechanisms Messaging Mechanisms

Outsourcing connectivity to specialist

Messaging& Network Vendor Physical Network Network Vendor Network

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SWIFTs messaging services

Financial institutions
SWIFTNet FIN

Infrastructures and service providers

SWIFTNet InterAct SWIFTNet FileAct

SWIFTNet Browse

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Securities Market Infrastructures SWIFTNet FIN

Argentina Australia Austria Belgium Caja de Valores Australian Stock Exchange SFE Austraclear OeKB CIK Euroclear Bank MTS National Bank of Belgium CBLC CDS Japan Hungary Israel Italy Hong Kong HK Futures Exchange Hong Kong Monetary Authority SEHK Options Clearing House Keler Tel Aviv Stock Exchange CCG Monte Titoli JSCC Tokyo Stock Exchange Portugal Russian Federation Singapore Banco de Portugal SITEME MTS Depository Clearing Company The National Depository Center Central Depository Singapore Exchange

Slovakia
Slovenia South Africa Spain

Bank of Slovakia
Central Securities Clearing Corporation KDD STRATE JSE Securities Exchange Iberclear MEFF MTS NCSD Sweden VPC OMX SIS SIS x-clear Securities Central Depository Thailand Securities Depository CREST LCH.Clearnet London Stock Exchange Chicago Mercantile Exchange Clearing Corporation DTCC Omgeo Options Clearing Corporation

Brazil Canada

Croatia
Denmark Dubai Estonia

Sredisnja Depositarrna Agencija

OMX VP DIFX Estonian Securities Depository OMX NCSD Finland APK OMX Euroclear France Euronext Paris MATIF MTS Eurex Clearing Clearstream Banking AG MTS Central Securities Depository Bank of Greece

Kazakhstan
Korea Latvia

Kazakhstan Stock Exchange

Securities Depository Bank of Latvia Central Depository OMX Midclear OMX Clearstream Banking SA S.D. Indeval Euroclear Nederland MTS VPS National Depository for Securities KDPW

Sweden Switzerland Taiwan Thailand UK (& Ireland) USA

Lebanon Lithuania Luxemburg Mexico Netherlands Norway Poland

Finland France

Germany

Greece

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Banking Market Infrastructures

Albania Algeria Angola Australia Austria Azerbaijan Bahamas Bahrain Barbados Belgium Bosnia and Herzegovina Botswana Brazil Bulgaria Canada Chile CLS Croatia Denmark East Caribbean Egypt EBA (EURO1/STEP1) ECB (TARGET) Eurosystem (TARGET2) Fiji Finland France Georgia Germany Ghana Greece Guatemala Hong Kong Hungary Ireland Italy Jordan Kenya Kuwait Latvia Lebanon Lesotho Luxemburg Malta Mauritius Namibia Netherlands New Zealand Norway Oman Pakistan Palestine Philippines Romania Russian Federation Singapore Slovenia South Africa Spain Sri Lanka Sweden Switzerland Tanzania Thailand Trinidad and Tobago Tunisia Uganda United Kingdom United States Venezuela Zambia Zimbabwe Central African States West African States

High-Value Payments
Countries Live 67 8 8

Implementation Planning

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Slide 13

Agenda
SWIFT update Securities Market Infrastructures using SWIFT ISO Standards

20061019_AECSD

Slide 14

SWIFTNet FIN: Settlement & Reconciliation Process CSD

Trade Date
MT 540-3 Settlement Instruction
MT 537 MT 548 Pending Status of Instruction Transactions MT 544-7 Confirmation of Settlement MT 535 Statement of Holdings MT 536 Statement of Transactions
Slide 15

Settlement Date

CSD participant
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SWIFTNet FIN: CA Message flow - non elective event Stock Exchange/CSD

Ex Record Date Date Payment Date

Announcement

MT 564 Notification of Announcement

MT 564 Notification of Entitled Position

MT 566 Confirmation of account activity

CSD participant
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SWIFTNet FIN: CA Message flow - elective event Stock Exchange/CSD

Ex/ Announcement Record Date of offer Response period MT 565 Instruction MT 567 Status of Instruction MT 566 Confirm of account activity Deadline Date Receipt of new shares

MT 564 MT 564 Notification Notification of Offer of Ex date Entitlement

CSD participant
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MT 564 Notification Entitlement Calculation

Slide 17

SWIFTNet FIN: Post-trade pre-settlement matching (model I) CSD

MT 540-3 Settlement Instruction MT 540-3 Settlement Instruction

MT 515 Trade confirmation

Matching utility
MT 509 Trade status

MT 515 Trade confirmation

Receiver

Deliverer

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SWIFTNet FIN: Post-trade pre-settlement matching (model II)

CSD Matching engine

MT 548 Status of instruction

MT 540-3 Settlement Instruction

MT 540-3 Settlement Instruction

Receiver

Deliverer

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Typical usage by Securities Market Infrastructures of all SWIFTNet Messaging services

FIN
Instructions Confirmations Status Statements CA reporting CA confirms Coll Mgmt ISO 15022

FileAct

InterAct

Browse

Putting legacy (domestic standards) on file transfer on SWIFTNet

Putting legacy messaging on SWIFTNet (proprietary formats or ISO 15022 or ISO 20022) Proxy Voting Putting legacy screen-based access on SWIFTNet

(proprietary formats or ISO 15022 or ISO 20022)

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Securities market infrastructures SWIFTNet InterAct, FileAct and Browse

Belgium Euroclear Bank EUCLID File Transfer EUCLID PC / Server

France
Italy Luxemburg Netherlands Spain United Kingdom USA

Euroclear France
Monte Titoli Clearstream International Euroclear Nederland Iberclear CRESTCo DTCC

E2A
Express II Creation Direct Direkte Verbinding Ventana Unificada de Communicaciones (VUC) SWIFTNet CREST Deriv/SERV

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Who is listening?

ECSDA (EU)

ACSDA (Americas)
ACG (APAC) AECSD (CIS) and you, the AMEDA and a date for your diaries

Boston October 1-5, 2007

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Accessing CSDs through SWIFT: Market needs

One standardised solution Interfaces Messaging Security Giovannini compliant and EU integration future proof Complete range of communication channels ISO compliant standards (15022 and 20022) Uniform service (support, liability,) Value-added services

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Thank you for your attention

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Central Securities Depositories, ISO Standards and SWIFT Automation today and for the future

John Falk
19 October 2006
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Back-up

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New SWIFTSolution: SWIFTNet CSDAccess

CSD participants

CSDs
1-by-1 messaging channel File transfer channel Operator-based access

ISO 15022 ISO 20022

Potential added value: Notary function Copy function to regulators MT/MX translation

...

...
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Global solution Giovannini compliant and EU Harmonisation aligned

Slide 27

Agenda
SWIFT update Securities MIs using SWIFT EU C&S harmonisation New SWIFTSolution: SWIFTNet CSDAccess SN Kits: Connectivity for small users

20061019_AECSD

Slide 28

SWIFT usage for local intermediaries

Local CSD, Central Bank & settlement agents

International Cash Correspondents Global Custodians International B/Ds

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Making SWIFT cost-effective

Services Security Messaging soft Connectivity soft Network Complete set-up Special SN Kits for specific solutions

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Market Infrastructure CUGs: A closed community of users on SWIFT

Service participant
SWIFT user SWIFT user

Service Participants within a Closed User Group

Service participant Market infrastructure

SWIFT member

SWIFT user

Service participant

SWIFT user

SWIFT user

Through Closed User Groups, the administrator takes full control: which messaging options, which billing option, who has access,
20061019_AECSD Slide 31

The SWIFT community

securities market data providers fund administrators MA-CUGs securities MIs - treasury counterparties - treasury ETC service providers 2000 banks found SWIFT 1973 - broker/dealers - central depositories & clearing institutions - exchanges travellers cheque issuers money brokers - registrars & transfer agents - custody providers - trust or fiduciary services companies 1996 investment managers trading institutions

- payments MIs - proxy voting agencies - non-shareholding financial institutions

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treasury securities ETC service providers

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Using SWIFT to communicate with securities market infrastructures

Exchange

Benefits for system owner

B/D

IM

Order

B/D

Trade

Trade

Mission critical levels of

MU / ETCP CM GC SC SA (I)CSD SA CH / CCP CM

> reliability, security and support

Time to market is

> short
Low entrance barriers for

> remote members

Access to all types of domestic and international players

> increased internationalisation of client activities

Global standards ISO 15022, XML, FIX for

> trading > clearing > settlement > custody

20061019_AECSD Slide 33

Using SWIFT to communicate with securities market infrastructures

Exchange

Benefits for system member

B/D

IM

Order

B/D

Trade

Trade

MU / ETCP CM GC SC SA (I)CSD

CH / CCP CM SA

Technical standardisation: single window access to domestic and international systems through one interface

> cost efficiency

Mission critical levels of

> reliability, security and support

Business standardisation: ISO 15022, XML, FIX

> Market Practice standardisation > straight-through processing > Real-time DVP > shorter settlement cycles > risk reduction
20061019_AECSD Slide 34