Need for Standardization and Interoperability in the Transformation of Capital markets

R Vivekanand Head, eClearSettle Tata Consultancy Services

Tata Consultancy Services Ltd.

Our Lineage : TATA Group

Indias Largest Conglomerate - 91 operating companies across 7 industry sectors Represents Excellence & Integrity Trusteeship Concept Pioneering Spirit Leaders in multiple businesses Total Market Cap - Rs. 196,422 Crs. ($ 42.8 bn.) as of 30th June 2006

About TCS

FY 2006 revenue of USD 2.97 Billion Over 71,000 employees Global presence - Operations in 47 countries, 169 offices 1st Company in the world to be assessed at Level 5 for integrated enterprise-wide CMMI and PCMM First and Largest
Software R&D Centre in India Software Exporter in India

Awarded triple certification for

Quality (ISO 9001:2000) Security (BS 7799-2:2002) Services (BS 15000-1:2002)

Truly Global Presence

169 Offices in 35 countries 41 Delivery Centres in 11 countries

Europe 19 N. America 51 4 UK & Ireland 8 2 India ME & Africa 4 Iberoamerica 7 6 2 67 22 APAC 13 3 2

Revenue By Geography * Others, 8.50%

India, 10.60%

Sales Office Delivery Centres

Europe, 27.70%

America, 53.20%

As on 30 June 2006
4

TCS BFS Solutions

CSD Expertise gained in 21 markets has helped us build a global perspective

China Clear Deutsche Bourse SEGA XClear CDS NDC, Moscow Korea Depositary

DTCC KCC DIFX Saudi Arabia Malaysian Depositary NSDL NSCCL Philippines Depositary CCIL Singapore Depositary Taiwan Depositary

Product Implementation / Solution Development Consulting

NCDEX RBI STRATE , South Africa

TCS continues to be the only Indian Vendor to build large scale securities processing platforms globally.

Agenda
Business Drivers, Trends in the CSD space Path to Transformation Benefits of Global Standards Need for interoperability Local Practices Technology Market Transformation Model

STRATE A case study

Trends in the CSD space Key Business Drivers

Operational Efficiency Risk Reduction Increased Volumes / Liquidity Access to Information Cost Reduction Globalisation - links End investor services Integrated Registry Automated Corporate actions

Compliance to Standards

Right Technology

Retaining Local Practices

MARKET TRANSFORMATION
8

Path to Transformation
Financial Products
Local Practices Regional, National Rules, Legislation, Procedures, Practice Regulations

Systems Hardware, Networks, Links, Software Products, Solutions, Frameworks

Global Standards - BIS, G30, ISO 15022 Security, Best Practice

The Standards Dilemma

BIS G30 Recommendations Giovannin i

ISSA IOSCO

SMPG

FIX ISO 15022

Global Standards Local Practices

Regional Practices National Policies Regulations Local Business Rules Religious Rules
10

Legislations

Benefits of Global Standards

Familiarity and attractiveness to Global investors Ready connectivity to the world to local participants Lower software TCO
Products can be implemented instead of turnkey projects

Incorporate the lessons learnt by the rest of the world

Risk Management best practices Settlement models CSD / ICSD Links

But no two markets are alike

11

Local Practices

Consolidation and Harmonization

Pre Validation Gross settlement Retail Markets

Distinct Practices Yet Successful and suits the local market

12

Need for Interoperability

Expand reach to Global markets Easy connectivity, Improve STP Leverage investments made using technology
Service oriented architecture Software as a service

Eliminate duplication of networks, infrastructure, software Reduce operation costs

13

Technology
Multi Tier technology Move away from monolithic tightly coupled systems Interoperability, Service Oriented Architecture Multiple Access Channels Web, Phone, Mobile, Email High availability and redundancy without high cost Seamless Integration to external systems to achieve STP

14

Market Transformation Model

Financial Products
Local Practices Regional, National Rules, Legislation, Procedures, Practice Regulations

Systems Hardware, Networks, Links, Software Products, Solutions, Frameworks

Global Standards - BIS, G30, ISO 15022 Security, Best Practice

15

CASE STUDY A market revolution - STRATE, South Africa

Tata Consultancy Services Ltd.

16

South African Market - 1998

Regarded as a market with high Settlement Risk by GSCS Benchmarks (Minus 1.28 rating) Low Foreign Investments, Flight of capital Transactions could take weeks to settle or would fail Major companies were moving their primary listing to London May 1998 contract for system implementation signed with TCS Dematerialization and Electronic settlement revolutionized the market The new SAFIRES application was one of the first in the world to be ISO 15022 compliant - 1998 Early adopter of SWIFTNet - 2002

17

South African Market - 2002

Guaranteed Settlement Heightened levels of Foreign Investment Increased Liquidity Reductions in Risk and increased efficiency Easy connectivity to Global custodians Standards and secure networks led to increased investment trade volumes doubled 1998 South Africa (-1.28) 1999 0.14 2000 36.41
Full Demat

2001 58.48
Full system live

2002 98.13

SWIFT+Local Nw Full move to SWIFT

Source = GSCS Benchmarks

Settlement risk includes factors such as : Interest rate and overall cost of failed trades

18

THANK YOU

19