SWIFT for investment managers

End-to-end solutions for the securities industry

SWIFT for investment managers

How can you benefit from SWIFT - asmany other asset managers already do?

How can you further optimise your benefitsfrom SWIFT?

Dear investment manager,

You are at the forefront of every securities transaction.

Multiple communication flows, a wide range of counterparties and manyasset classes put a strain on your business environment and introduce risk.

SWIFT offers you standardised electronic messaging and a single, low costway of communicating with all your counterparties. These key componentsallow you to automate your processing environment.

Automation with SWIFT enables you to achieve three key benefits:

- Gain competitive advantage

- Improve risk control

- Improve your bottom line

In the following pages, you will find a description of how these benefits arerealised. Every investment manager is different, so we will work with you todetermine how you can best achieve these benefits.

Read why one investment manager says, “The scalability we get throughSWIFT automation is huge. We would not have been able to support ourgrowth and stay in this business without it.”

Contact us to discuss how your institution can best benefit from SWIFT.

Yours faithfully,

Francis RemacleMember of the SWIFT Executive CommitteeHead of Securities Industry Division

www.swift.com

Take advantagewith SWIFT

About this guideThis guide for investment managers is designed to provide existing andpotential users of SWIFT with an overview of SWIFT’s product and serviceoffering. It highlights your specific business needs and requirements, andoffers suggestions as to how you can use SWIFT to gain competitiveadvantage, improve risk control and improve your bottom line.

For the purposes of this guide, an investment management institution (IMI)is defined as an institution responsible for making decisions to buy, holdor sell financial instruments. This includes insurance companies andgovernment institutions that also have this responsibility. The terminvestment management institution also applies to investment managers,asset managers, fund managers and portfolio managers.

Turn the page for more information on the value SWIFT can bring to your organisation...

Benefits you can attain through using SWIFTHow can you benefit from SWIFT as many other asset managers already do? How can you further optimise your benefits from SWIFT?

Improve operational efficiency Pg. 1

Reduce cost & time to market Pg. 3

Improve customer service Pg. 5

Reduce processing risks Pg. 7

Reduce operational uncertainties Pg. 9

Reduce capital requirements Pg. 11

Reduce processing costs Pg. 13

Reduce cost of change Pg. 15

Reduce business expansion cost Pg. 17

ROI (return on investment) tool Pg. 19

Market gap analysis Pg. 20

Gain

competitive

advantage

Improve

risk

control

Improve

your

bottom

line

Customer

analysis tools

Improve operational efficiency Pg. 1

Reduce cost & time to market Pg. 3

Improve customer service Pg. 5

Reduce processing risks Pg. 7

Reduce operational uncertainties Pg. 9

Reduce capital requirements Pg. 11

Reduce processing costs Pg. 13

Reduce cost of change Pg. 15

Reduce business expansion cost Pg. 17

ROI (return on investment) tool Pg. 19

Market gap analysis Pg. 20

Gain

competitive

advantage

Improve

risk

control

Improve

your

bottom line

Customer

analysis tools

SW

IFT’

s va

lue

prop

ositi

on

for

inve

stm

ent

man

ager

s

Section 1:SWIFT’s value proposition for

investment managers

1

Gain competitive advantage

Improve operational efficiency“We started using SWIFT about a year ago. Efficiency wise it has beenunbelievable. Now we are able to reach about 90% straight throughprocessing (STP) for outgoing messages.”

Investment manager using SWIFT

Increase automation • seamless integration with your frontand back-office systems

+ Reduce risk and cost • reduction in manual processing through automation

• reduction in processing errors andfailed trades

+ Improve operational control • automation means you can focus on exception processing

• greater internal and externalregulatory compliance

= Increased operational efficiency

2

Improve operational efficiencyIn today’s market place, you need to take advantage of every option availableto help make you more competitive. Returns on investments can be impactedby failed trades, errors and losses, all of which proliferate in manual processingenvironments.

Benefits

Increase efficiency through automationThe key to automation is the use of standards with a single communicationplatform. By standardising your business process flows for orders, settlementinstructions, reporting, corporate events, payments, foreign exchange andtreasury functions, you can integrate your front and back office andcommunicate with your counterparties using one language. You will thenderive increased efficiency through automation.

Reduce risks & costs through reduced processing errorsWhen working in an automated environment, you reduce the risk of manualprocessing errors. Integrating the exchange of information with yourcounterparties directly into your processing applications eliminates the needfor rekeying, and therefore eliminates the possibility of rekeying errors andmisinterpretation of trade details.

The associated costs of operating in a manual environment, along with thecosts incurred through errors and failed trades, are reduced as a result ofautomation.

Improve operational control of your businessWithout automation, your efforts are focused on the processing and rekeyingof information. Automation enables you to focus on exception processing.Problems or errors that do arise are identified and can be acted uponimmediately.

The result is an improvement in operational control. The more control youhave, the less chance there is for errors and subsequently, fewer failed or late trades.

3

Gain competitive advantageReduce cost and time to market“Before we had SWIFT, we had proprietary terminals all over the place. Staffneeded to be trained on all the different systems and data was rekeyed allday long. Now, we simply have one system.”


Improve scalability • volume independent processing

+ Increase reusability • standardisation across all asset classes

• covering all your counterparties (7600 institutions in 200 countries)

+ Reduce cost and time • enable your current environment for business expansion for future business needs

= Reduced cost and time to market

4

Reduce cost and time to marketIn order to meet customer needs and take advantage of market trends, you need to be able to change and expand your business as opportunitiespresent themselves. Manual processing environments are slow to change,which inhibits business expansion and the introduction of new products,thereby reducing competitive advantage.

Benefits

Business growth through scalabilityBy automating your business processing environment, through the use ofmessage standards and a single method of communication with all of yourcounterparties, you will reduce the impact of volatility in transaction volumes.

As your business expands, with increased assets from new and / or existingclients, automation provides you with a scalable processing environment.

Business expansion through reusabilityThrough the use of message standards and a single method ofcommunicating with all of your counterparties (including brokers, custodians,exchanges and central securities depositories), you have a solution that canbe reused as you expand your business focus into new and different areas.These message standards are suitable for multiple asset classes includingequities, fixed income, investment funds, money market instruments, foreignexchange, derivatives and financial payments.

Reduce cost and time of expanding businessNew business expansion is easily undertaken with an automatedenvironment. This is due to reduced costs and time needed to bring newbusiness products to market.

5

Gain competitive advantageImprove customer service“If we were to report everything over fax, we would probably need twice asmany people to do this. We have increased our traffic tenfold without reallyincreasing the headcount.”


Increase service monitoring • focus on exception processing

+ Reduce errors and • reduction in processing errorsfailed trades • timely detection and resolution of

potential trade fails

+ Improve customer • timely reportingsatisfaction • focus on what matters to your

customers

= Improved customer service

6

Improve customer serviceThe bottom line for any successful business is impacted by how satisfied yourcustomers are. A satisfied customer creates a real competitive advantage,and can serve to attract new business.

Benefits

Increase service monitoringAn increase in the automation of your processing environment allows you tofocus on exception processing. This provides you the opportunity to increasethe monitoring of your business and transaction processing you carry out onbehalf of your customers. This can be achieved through the use of messagestandards and a single method of communicating with all of your counterparties.

You will be better able to monitor pending trades, manage cash balances, and report on positions and activity to your customers.

Reduce errors and failed trades through automationAn automated environment reduces the risk of manual processing errors.Integrating the exchange of information with your counterparties directly intoyour processing applications eliminates the need for rekeying, and themisinterpretation of trade details.

The increased focus on service monitoring means that you will discover errors that do occur much sooner, and be in a better position to provideproblem resolution.

Ultimately, the quantity and severity (e.g. associated cost) of errors and failedtrades will be reduced.

Improve customer satisfactionWith a higher level of service monitoring and a reduction in errors and failedtrades, you will be better able to focus on your customers’ investment needs.The operational concerns of your customers will be fewer. Ultimately, you willsee an improvement in customer satisfaction and therefore an increase incompetitive advantage.

7

Improve risk controlReduce processing risks“Without SWIFT, we would certainly need to double the number of operationsstaff and maybe even more. Fluctuations in the business cycles would causeproblems because we would have to pull in temporary staff. This wouldincrease the risk and further reduce efficiency.”


Reduce misinterpretation • industry accepted standards for more of information than 300 business processes

• standardisation across all assetclasses

+ Assured communication • assured identity of the sender

• assurance of delivery

+ Reduce errors and • reduction in processing errorsfailed trades • timely detection and resolution of

potential trade fails

= Reduced processing risks

8

Reduce processing risksMany transactions exchanged in the financial industry are written in anunstructured way. This leaves room for interpretation and rekeying errors,introduces translation issues and ultimately delays the entire processingchain. This presents a very real, and costly, possibility of failed trades.

Operating and maintaining multiple applications, syntaxes, databases andsecurity infrastructures, combined with operating in a manual processingenvironment, significantly increases the operational risks associated withtransaction processing.

Benefits

Reduce misinterpretation of informationThe use of standards to exchange information ensures that you talk to yourcounterparties in one language. Combined with a single communicationmethod this allows you to automate your communication flows. This reducesthe potential for misinterpreting information through translation issues and rekeying errors.

Assured communication of informationBy using SWIFT as a communication channel, you are assured of the identityof the sender of the information as all communications are authenticated.Furthermore, you are assured that information you have sent to yourcounterparties has been safely received because delivery is guaranteed.

Reduce processing errors and failed tradesWhen working in an automated environment, you reduce the risk of manualprocessing errors. Automating the exchange of information with yourcounterparties eliminates the possibility of rekeying errors andmisinterpretating trade details.

The increased focus on service monitoring means that you will discover anyerrors that do occur much sooner, and be in a better position to provideproblem resolution.

Ultimately, you will reduce the quantity and severity (e.g. associated cost) oferrors and the risk of failed trades.

9

Improve risk controlReduce operational uncertainties“Security and reliability are the cornerstones of SWIFT. They will alwaysremain SWIFT’s key values”.

SWIFT Board Member

Increase resilience • always available

• zero risk environment

+ Increase control and • automation means you can focus compliance on exception processing

• greater internal and externalregulatory compliance

+ Assured settlement • reduction in processing errors

• timely detection and resolution of potential trade fails

= Reduced operational uncertainties

10

Reduce operational uncertaintiesThe ability to continue daily operational processes, even in the event ofcatastrophic disasters is a key challenge for the financial industry.

You want to be assured that the settlement of your transactions will takeplace. You want certainty that your communication channels are available andoperational at all times.

Benefits

Increase business resilienceWith a resilient communication platform, you will be protected from losing anybusiness because your services are unavailable or late. You can conductyour business in the certainty that you will always be able to communicatewith your counterparties, as and when required.

Increase control and compliance of your businessAn increase in the automation of your processing environment (through theuse of message standards and a single method of communicating with all ofyour counterparties) allows you to focus on exception processing. Thisprovides you with the opportunity of increasing the monitoring of the serviceand transaction processing you carry out on behalf of your customers.

Automation, reach, trust of sender and guaranteed delivery means that youare in control of your operational and processing environments.

Assured settlement of your transactionsIntegrating the exchange of information with your counterparties eliminatesthe possibility of rekeying errors and misinterpretating transaction details. Theincreased focus on service monitoring means that you will discover any errorsthat do occur much sooner, and be in a better position to provide problemresolution. You and your customers can be more assured of the settlement oftransactions.

11

Improve risk controlReduce capital requirements“Operational risk is the risk resulting from inadequate or failed internalprocesses, people and systems or from external events.”

Basel II

Increase security and • always availableresilience • zero risk environment

+ Reduce operational risk • reduction in manual processing through automation

+ Lower reserve requirements • Lower Basel II capital requirements thanks to lower operational risk (if applicable to your institution)

= Reduced capital requirements

12

Reduce capital requirementsWhilst the financial services industry has always been considered as robust interms of resilience, events in recent years have proved that there can be noroom for complacency. Stringent regulatory requirements have become hottopics for the industry as a whole.

Benefits

Increase security and resilience in your business environmentSWIFT services, in the form of a communications network and messagingstandards, are always available. You can conduct your business in thecertainty that you can communicate with your counterparties, as and whenrequired.

The SWIFT network is highly secure & trusted, and is used by major financialinstitutions in 200 countries around the world.

Reduce operational risk through increased automationWhen working in an automated environment, you reduce the risk of manualprocessing errors. The global reach available through SWIFT (more than 7600 users), combined with the security and availability of the network,means that you are assured of the sender’s identity when receivinginformation from your counterparties, and assured that the information youare sending will be delivered.

A controlled processing environment with the right level of security willcontribute to reducing your operational risk.

Lower reserve requirementsThe Basel II framework will impact a significant number of investmentmanagers. For those affected, lowering your operational risk by using themost secure messaging infrastructure will enable you to lower your capitalreserve requirements when using advanced measurement approaches.

13

Improve your bottom lineReduce processing costs“The cost of SWIFT is insignificant compared to the cost of other moremanual messaging methods.”


Increase standardisation • industry accepted standards formore than 300 business processes

• standardisation across all asset classes

+ Simplify communication • single method of communication with all your counterparties

+ Increase automation • seamless integration with your front and back-office systems

= Reduced processing costs

14

Reduce processing costsMargins in the investment industry are under continued pressure. If you wantto sustain profitability, you need to ensure processing costs are under control.Automation is acknowledged as the key to success in this area.

Benefits

Reduce cost and errors through standardisationThe use of message standards greatly enhances the efficiency of informationexchange. Standards should cover all process flows including orders,settlement instructions, reporting, corporate events, payments, foreignexchange and treasury functions. This ensures that you talk to yourcounterparties in one language. Standardisation is the first logical step to take if you want to automate communication flows.

Simplify communicationUsing a single communication method to exchange financial informationenables you to reduce the multiple communication channels currently used to talk to your counterparties, such as fax, Internet and proprietary links.

Using standardised electronic communication, your flows will be greatlysimplified, thereby leading to efficiency gains and ultimately a reduction inoverall processing costs.

Increase automation and focus on exception processingThe combination of message standards and a single communication methodis the first step to establishing an automated environment within yourprocessing and operations departments.

Increased automation allows you to focus on exception processing, andultimately, spend more time servicing your customers.

15

Improve your bottom lineReduce cost of change“Our transaction volumes can vary significantly from one day to the next.However, the effort involved in generating our SWIFT based settlementinstructions sent to custodians is very limited, given the high levels ofautomation we have achieved in this area. ”


Increase standardisation • industry accepted standards for more than 300 businessprocesses

• lower cost of making changes to processing environment


+ Increase scalability • volume independent processing

= Reduced cost of change

16

Reduce cost of changeThe financial industry is constantly changing. Investment products arebecoming increasingly advanced and new emerging markets are opening up.Market practice and standards are constantly evolving, and transactionvolumes are forever fluctuating. Your institution needs to be able to keep upto date with these changes. Changes that impact your operational andprocessing environments often require a significant investment, both from afinancial and resource perspective.

Benefits

Increase efficiency through standardisationYou can communicate with your counterparties in one language, usingstandards that cover the entire business process chain, including orders,instructions, reporting, corporate events, payments, foreign exchange andtreasury. Standardisation gives you the means to safeguard your operationalefficiency in an ever-changing environment.

Lower cost of change through reusabilityWith one communication platform and one set of message standards you cantalk to all of your counterparties (including brokers, custodians, exchangesand central securities depositories). These message standards are suitablefor multiple asset classes including equities, fixed income, investment funds,money market instruments, foreign exchange, derivatives and financialpayments.

This significantly lowers the cost of making changes to your operational andprocessing environments.

Reduce cost of change and growth through scalabilityWith increased business from new or existing clients, your volumes willincrease. An automated processing environment reduces the impact of anincrease in volumes, providing you with scalability. New business can beeasily absorbed into your existing environment with minimal increase in cost.

17

Improve your bottom lineReduce business expansion cost“SWIFT is definitely a scalable solution. We could double our volumeswithout noticing.”


Increase reach • covering all your counterparties (7600 institutions in 200 countries)


+ Increase scalability • volume independent processing

= Reduced business expansion cost

18

Reduce business expansion costYou need to be able to change and expand your business as opportunitiespresent themselves. However, bringing new products or services to themarket is a costly and time consuming exercise when you are working in a manual environment.

Benefits

Increase reach to your counterpartiesAs you expand your business, your network of counterparties grows. SWIFTis used by more than 7600 financial institutions (including investmentmanagers, broker / dealers, custodians, banks, securities depositories,exchanges, fund administrators and market data providers), in 200 countries.This extensive reach enables you to communicate with your counterparties ina secure, low cost and automated way, 24 hours a day / 7 days a week.

Lower cost of change through reusabilityYou can reduce cost and complexity through automated communication withmultiple counterparties across multiple asset classes by using onecommunication platform and one set of message standards. The messagesstandards are suitable for multiple asset classes including equities, fixedincome, investment funds, money market instruments, foreign exchange,derivatives and financial payments. Reusing your operations and processingenvironment significantly lowers the cost of expanding your business.

Reduce cost of change and growth through scalabilityAs your business expands, with increased assets from new or existing clients,your volumes will increase. With the automation of your processingenvironment the impact of an increase in volumes is reduced.

Automation provides you with a scalable processing environment, meaningyou can easily absorb new business into your existing environment. You canfocus your attention on what really matters: growing your business andproviding excellent customer service.

19

Return on investment toolSWIFT’s Return on Investment (ROI) tool is used by your SWIFTrepresentative to help you put together the business case for using SWIFT.

It provides an easy way to calculate the savings you can get from usingSWIFT in different areas of your business. It also helps you prioritise whichbusiness processes you need to automate first.

Contact your SWIFT representative to calculate the financial benefits for yourorganisation and see what SWIFT can do for you.

The tool will go through the following steps:

- Introduction (how to use the tool)

- Flow (looking at your current business processing flows)

- Setup (looking at your infrastructure needs)

- Result (an estimate of your costs and savings from using SWIFT)

The ROI tool will take into account your current communication means andvolumes and the investment needed to use SWIFT. The tool will also take intoaccount additional integration and project costs.

The end result of the tool is to provide you with an estimate of the ROI thatthe use of SWIFT can deliver to you, including:

- Cost of using SWIFT

- Comparison of the cost of SWIFT versus cost of other communication means

- Payback period for your investment in SWIFT

20

Market gap analysis toolFor existing users of SWIFT the Market Gap Analysis tool analyses whetheryou make optimal use of SWIFT.

Do your traffic patterns match the ones of other investment managers inthe industry?

By comparing your traffic to the benchmark you can see where you can stillmake better use of SWIFT.

Example of market gap analysis tool

Your SWIFT relationship manager will be happy to share the results with you.

YTD IMI traffic report: INVMGR01Benchmark criteria: >100 bn AUM The benchmark consists of 49 BICs

Traffic breakdown sent Traffic breakdown received

Europe UK & Ireland

CAT1

CAT2

CAT3

CAT5

CAT9

Institutiondistribution

sent

Benchmarkdistributionreceived

Institutiondistributionreceived

Benchmarkdistribution

sent

Institution traffic evolution sent and received

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

sep-03 oct-03 nov-03 déc-03 jan-04 fév-04 mars-04 avr-04 mai-04 juin-04 juil-04 aoû-04

Sent

Rcvd

Abo

ut S

WIF

T

Section 2:About SWIFT

1. Introduction 22

1.1. Investment management institution (IMI) 22

1.2. SWIFT 22

2. Business functions 24

2.1. Equities, fixed income & listed options 26

2.2. Investment funds 28

2.3. Payments & cash management 30

2.4. Treasury 32

3. Who can connect to SWIFT? 34

3.1. Categories of SWIFT user 35

3.2. SWIFT pricing and fees 37

4. How can you connect to SWIFT? 40

4.1. Direct connectivity 41

4.2. Indirect connectivity 42

5. SWIFT Partner Solutions 44

5.1. Vendor segmentation 45

5.2. Global label programme 46

5.3. Working groups and vendor support 47

6. About Standards 48

6.1. International Organisation for Standardisation (ISO) 48

6.2. Securities Market Practice Group (SMPG) 48

6.3. Standards convergence 49

6.4. Bank Identifier Code (BIC) 51

7. Industry co-operation 52

7.1. Board committees and working groups 52

7.2. National member group 52

7.3. National user groups 53

7.4. Industry bodies & regulatory authorities 53

7.5. Sibos – financial services forum 55

8. About SWIFT 58

8.1. Our vision 58

8.2. Our mission 58

8.3. Facts and figures 58

8.4. SWIFT: history & evolution 58

22

1. IntroductionThis guide for investment management institutions (IMIs) is designed toprovide existing and potential users of SWIFT with an overview of SWIFT’sproduct and service offering. The focus is on investment managementinstitutions, highlighting your specific business needs and requirements, andoffers suggestions as to how you can use SWIFT to gain operationalefficiencies, reduce risks and costs, and ultimately gain improvements instraight-through-processing (STP).

1.1. Investment management institution (IMI)For the purposes of this guide, an investment management institution isdefined as an institution responsible for making decisions to buy, hold or sellfinancial instruments. This includes insurance companies and governmentinstitutions that also have this responsibility. The term investmentmanagement institution also applies to asset managers, fund managers andportfolio managers.

1.2. SWIFTSWIFT is the industry-owned co-operative supplying secure, standardisedmessaging services and connectivity to more than 7,600 financial institutionsin 200 countries. These institutions exchange millions of messages valued intrillions of dollars every business day, and are active in the payments,securities (equities, fixed income & listed options), treasury (foreign exchange,money markets & derivatives) and trade services markets.

Over the course of our history, more and more securities institutions havejoined SWIFT. Today, investment management institutions, broker-dealers,custodians, securities depositories, clearing organisations, exchanges, centralcounterparties, virtual matching utilities, electronic trade providers, proxyvoting service providers, market data providers, distributors, transfer agentsand fund administrators rely on SWIFT to reduce the complexity, risk and costof their domestic and international transactions. SWIFT facilitatesstandardised communications and processing at all levels of the lifecycle ofequities, fixed income, listed options and investment funds transactions –from trade order through to settlement and custody services.

23

SWIFT’s support for securities processing lifecycles

Pre-trade

Trade

Po

st

trad

e /

Pre

-sett

lem

en

t

Clearin

g &

settl

ement

Securities reportingCorporate

actions

Secu

riti

es

len

din

g

Collate

ral

managem

ent

Equities, fixed income

& listed options

Investment

funds

A/C opening

Transfers

Ord

ers

&

sw

itch

es

Reporting

NAV / Price reporting

Cash

flow

reportin

g

Co

mm

issio

ns

rep

ort

ing

Static

Data

reporti

ng& maintenance

24

2. Business functionsAs an investment management institution, you are involved from the verybeginning of the traditional equities and fixed income transaction lifecycle(e.g. trading), and may well be involved in all settlement and custody relatedprocesses, as well as all aspects of investment funds distribution.Additionally, many of your securities related business processes lead you tobe involved in payment, foreign exchange, money market and derivativerelated functions.

Business functions of an investment management institution (IMI)

Within the following pages, the applicable SWIFTSolutions for each businessarea are shown in the SWIFTSolutions per Process diagrams. The intention isto highlight the solutions available. For a more detailed overview of eachsolution, including the specific message standards available, refer to theapplicable chapter in the SWIFT’s Products & Services section of this guide.

IMI

Equities, fixed income & listed

options

Derivatives Cash management

Payments

Investment funds

Money markets

Foreign exchange

25

Foreign exchangeMoney marketsDerivatives

Business areas SWIFTSolutions + offerings Sub-sectionEquities, fixed income ISO 15022 message and listed options standards (Cat. 5)

SWIFTNet FIX 2.1

Investment funds SWIFTNet Funds

ISO 15022 message standards (Cat. 5) 2.2

Payments and cash Category 1 and 2 message management standards

Category 9 message standards

SWIFTNet Cash Reporting 2.3

Treasury: Category 3 message standards

SWIFTNet CLS third party service

SWIFTNet Accord 2.4

26

2.1. Equities, fixed income & listed optionsWithin the equities, fixed income and listed options markets, there are fourspaces through which activity is focused, covering initial trading through tosettlement and custody events.

The players most typically involved in these markets, with whom you need tocommunicate, include the following:- B/D (Broker / Dealers)- VMU (Virtual Matching Utilities) / ETCP

(Electronic Trade Confirmation Providers)- Custodians- in some instances, directly with I/CSD

(Central Securities Depositories, including Domestic and International)- in some instances, directly with Exchanges

(member sponsored direct access)

Reporting & custody

Pre-trade /

Trade

Post -trade /

Pre-settlement

Clearing &

settlement

IMI B/D

Clearer

I/CSD

Custodian

VMU /

ETCP

CCP

Exchange

B/D

Clearer

Client side Street side

27

SWIFTSolutions per process & space

Pre-trade / Trade + Post trade / Pre-settlement + Clearing & settlement processes

Reporting & custody services processes

�SWIFTNet FIX

&

ISO 20022

messages *

IOI /

Quotes

Order / Execution /

Pre-allocation

� �** ISO 15022

MT 502, 509,

513

SWIFTNet FIX

&

ISO 20022

messages *

Allocation / Confirm

/ Affirmation

� �ISO 15022

MT 514,

515, 517

SWIFTNet FIX

&

ISO 20022

messages *

Settlement

instruction / Confirm

�ISO 15022

MT 508, 524, 54x, 578

Business Business

Processprocess

* The first delivery of new ISO 20022 messages for the Pre-trade / Trade space are scheduled for availability Q4 2004.

Pre-trade / Trade

Post trade / Pre -settlement

Clearing & settlement

** ISO 15022 MT 5xx refers to a specific message type (e.g. MT 502 = Order to Buy or Sell).

Reporting

�* Securities

reporting

initiative over

FileAct

�** ISO 15022

MT 53X, 549,

575, 576,

584, 586

Corporate actions

& entitlements

Lending &

borrowing

/ Collateral

�ISO 15022

MT 56X

�MT 516, 526, 581,

582 (Ldg / Bor)

ISO 15022

MT 503-507, 527,

558, 569

(Collateral)

�* Market data

provider

initiative

Depositary

receipts

ISO 15022

MT 587, 588, 589

�

Business Business

ProcessProcess

** ISO 15022 MT 5xx refers to a specific message type (e.g. MT 535 = Statement of Holdings).

Custody services

* Details of the Securities Reporting and Market Data Provider initiatives can be found in Section 3 of this guide.

28

2.2. Investment fundsWithin the investment funds industry, there are four spaces through whichactivity is focused, covering initial account set-up through to orders andreporting.

The players most typically involved in the investment funds industry, withwhom you need to communicate, include the following:- Investor- Distributors and hubs (or Concentrators)- Transfer agents / Registrars- Fund administrators- Investment management institution- Custodian / Trustee- Cash agent

Note: An investment management institution can play several of the rolesdepicted in the above diagram.

Reporting & custody

Account

management

Orders

& confirmsTransfers

ConcentratorDistributor Transfer agent /

Registrar

Cash agent

Investor

Custodian /

Trustee

Investment

management

institution

Fund

administrator

29

SWIFTSolutions per process & space

Account management + Orders / Confirmations + Transfers processes

Reporting & custody services processes

�SWIFTNet Funds

(new ISO 20022

messages)

Account

management

Orders (including switches)

/ Confirmations

�SWIFTNet Funds

(new ISO 20022

messages)

�* ISO 15022

MT 502, 515

Transfers

�SWIFTNet Funds

(new ISO 20022

messages)

�ISO 15022

MT 540, 542,

544, 546

Business Business

Processprocess

Account

management

Orders & confirms

Transfers

* ISO 15022 MT 5xx refers to a specific message type (e.g. MT 502 = Order to Buy or Sell).

Other reporting(cash flow, commission,

static data)

Corporate

actions

�SWIFTNet Funds

(new ISO 20022

messages)

�ISO 15022

MT 56X

NAV price

report

�SWIFTNet Funds

(new ISO 20022

messages)

Account reporting(holdings, transactions, etc.)

�SWIFTNet Funds

(new ISO 20022

messages)

�* ISO 15022

MT 535

Business Business

Processprocess

Reporting &

custody

* ISO 15022 MT 5xx refers to a specific message type (e.g. MT 535 = Statement of Holdings).

30

2.3. Payments & cash managementDuring the course of carrying out your securities business, you will need topay away and receive monies (with regards to settlement of trades, dividendincome, etc.), and therefore can be both the ordering customer and thebeneficiary customer in the diagram below. Payments are made through yourfinancial institution, either directly through a bank, or indirectly through acustodian. You may also be involved in the reconciliation of cash positionsbetween your own records, and those of your banks and / or custodians.

Typical payments & cash management flows

SWIFTSolutions per process

Beneficiary

customer

Ordering customer’s

financial institutionBeneficiary customer’s

financial institution

Ordering

customer

Clearing &

settlement market

infrastructure

Typical role of

investment

management

institutions

Cash management

& customer status

�SWIFTNet cash

reporting

(XML standards)

Customer

payments

�* MT 101, 103

Financial institution

payments

�MT 200 - 203,

205, 210

�MT 900,

910, 935,

940 - 942,

950

Business

process

* MT xxx refers to a specific message type (e.g. MT 101 = Request for Transfer).

31

Customer payments

Category 1 messagesdeal with payments, orinformation aboutpayments, in which theordering party or thebeneficiary, or both, arenot financial institutions.

Financial institutiontransfers

Category 2 messagesdeal with payments, orinformation aboutpayments, in which allparties in the transactionare financial institutions.

Cash management &customer status

Category 9 messages areexchanged betweenfinancial institutions, eitheron behalf of themselves,other financial institutions,or customers. Theyinclude confirmations ofdebits and credits, andcash statements.

32

2.4. TreasurySWIFT offers a range of standards that cover different treasury marketsegments:- Foreign exchange (FX)- Money markets (Loan deposit; call / notice)- OTC derivatives (Foreign currency options; Forward rate agreements;

Interest rate derivatives)

Many of the treasury messages are specifically aimed at investmentmanagement institutions, allowing you to instruct and confirm FX and moneymarket deals with broker / dealers and custodians.

Additionally, the MT 300 and the MT 304 messages can be used to confirm and advise FX trades requiring settlement through CLS (Continuous LinkedSettlement (CLS™) bank). CLS is an industry initiative, represented by over 60 shareholders from the world’s largest financial institutions, to reduce risksassociated with cross-currency transactions. CLS bank delivers continuouslinked settlement services to ensure final and simultaneous settlement of cross-currency financial transactions. SWIFT provides the networkcomponents to connect CLS bank with its members and third party CLS users.

Typical treasury flows

Counterparty

IMI’s financial

institutionCounterparty’s financial

institution

Investment management

institution (IMI)

Clearing &

settlement market

infrastructure

33

SWIFTSolutions per process

OTC derivativesForeign exchange

�* MT 300, 303, 304,

307, 308, 380, 381

+SWIFTNet accord

+

SWIFTNet CLS

third party service

Money markets

�MT 320, 321,

330, 350

+

SWIFTNet accordSWIFTNet accord

�MT 303, 305, 306,

340, 341, 360 - 362,

364, 365

+

Business Business

Processprocess

* MT xxx refers to a specific message type (e.g. MT 300 = Foreign Exchange Confirmation).

34

3. Who can connect to SWIFT?The following table highlights the wide variety of financial industry players whocan currently connect to SWIFT. Some players can connect directly to SWIFTwhile others are able to connect indirectly via such services as an MA-CUG(member administered closed user group). An MA-CUG allows SWIFTMember’s to establish their own closed user group, through which they cancommunicate with non-SWIFT connected counterparties over SWIFT.

Financial industry players Connect to SWIFT Connect to SWIFT directly indirectly *

Securities (equities, fixed income & listed options)

Investment management institutions ✓

Broker / Dealer ✓

CCP (central counterparty) ✓

Exchange ✓

VMU (virtual matching utility) ✓

ETCP ✓(electronic trade confirmation provider)

Custodian ✓

(ICSD / CSD) [International] ✓Central securities depository

Market data provider ✓

Corporates ✓

Securities (investment funds)

Distributor ✓

Investors intermediary ✓ ✓

Fund administrator ✓

Transfer agent / Registrar ✓

Portfolio / Fund manager ✓

Concentrator / Hub ✓

Custodian / Trustee ✓

Payments, foreign exchange, treasury

Bank ✓

Clearing systems ✓

RTGS (real time gross settlement) systems ✓

Treasury counterparties ✓

Market infrastructures (e.g. CLS) ✓

* All players can, if they choose, connect indirectly to SWIFT.

(independentfinancial advisor’scannot currentlyconnect directly.)

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3.1. Categories of SWIFT userThere are three categories of SWIFT users:

Member (shareholder): An eligible organisation holding a share in SWIFTSCRL, including banks, eligible securities broker-dealers and regulatedinvestment management institutions. A Non-shareholding Member is anorganisation which complies with the eligibility criteria of a Shareholder(Member), but either chooses not to or is itself prevented from becoming aShareholder (Member).

Note: SWIFT shares are re-allocated amongst its members at least everythree years. The share re-allocation is calculated based upon each membersnetwork based invoice (e.g. the fees paid to SWIFT for use of its services).For non-shareholding members, once their network based invoice entitlesthem to five SWIFT shares, they must become a shareholder by purchasingthe required shares at the next share re-allocation.

Sub-member: An organisation more than 50% directly or 100% indirectlyowned by a Member. A Sub-Member must fall under full managementcontrol of the Member.

Participant: Any organisation may be permitted to make use of specificservices of SWIFT as a Participant, provided it complies with the criteria ofeligibility of a particular category of Participant. Participants are not entitledto shares in the capital of SWIFT.

The following are some of the categories of participants currently acceptedon SWIFT:- Central depositories and clearing Institutions- Fund administrators- Recognized exchanges for securities and related financial instruments- Registrars and transfer agents- Securities Electronic Trade Confirmation (ETC) service providers- Securities market infrastructure system participants- Securities proxy voting agency- Trust or fiduciary services companies

MA-CUGs (Member Administered Closed User Groups)Addressing the institution-to-client market, MA-CUGs enable SWIFTmembers (as described above) to create their own private communities andextend SWIFT-based services to their corporate clients who are notconnected directly to SWIFT. A key benefit of an MA-CUG is that it allowsyou to build services on your existing SWIFT infrastructure. This 'reusability'offers a more cost-effective approach to providing client services thandeveloping proprietary solutions, and also allows a considerable advantage inthe time-to-market.

For more information on MA-CUGs, contact your SWIFT representative.

36

SWIFT’s legal definition of an investment management institutionSWIFT recognises three types of investment management institution (IMI):- Primary IMI (e.g. investment manager, asset manager, fund manager, etc.)- Insurance company- Government institution

Primary IMIThe following conditions need to be fulfilled to be recognised as a primaryIMI:

i. Are primarily engaged in the management of Asset portfolios (whichmust be composed, at least in part, of securities); and

ii. Are authorised by a competent regulatory authority to conduct suchprimary business activity; and

iii. Are subject to relevant regulations applied by such competent regulatoryauthority.

iv. In countries where conditions ii) and iii) do not apply, are sponsored as aninvestment management institution by at least two-thirds of the S.W.I.F.T.SCRL shares held by the members in the country of origin of the applicantand either (a) by a minimum of ten members, or (b) by one percent of thetotal S.W.I.F.T. SCRL shares.

Either i), ii) and iii), or i) and iv) must apply. The support referred to in iv) (a)and (b) may be provided by a combination of members from and / or outsidethe country of origin of the applicant.

Insurance companyThe following conditions need to be fulfiled to be recognised as an insurancecompany:

i. Are engaged in the management of asset portfolios (which must becomposed, at least in part, of securities), in connection with their primarybusiness activity, which is either the provision of investment managementservices to other persons or the underwriting of insurance or both; and

ii. As above under primary IMIs.

iii. As above under primary IMIs.

iv. As above under primary IMIs.


37

Government institutionsThe following conditions need to be fulfiled to be recognised as agovernment institution:

i. An agency, department or institution of a national, regional or stategovernment or public international organisation (“public authority”)qualifies as an investment manager if primarily engaged in themanagement of asset portfolios (which must be composed, at least inpart, of securities) on behalf of and for the account of such publicauthority; and

v. As above under primary IMIs.

vi. As above under primary IMIs.

vii.As above under primary IMIs.


3.2. SWIFT pricing and feesFinancial institutions joining SWIFT incur fees based upon the way in whichthey connect to and use SWIFT. As a co-operative, SWIFT aims tocontinuously lower average message prices. SWIFT pricing is value based,allowing users to pay only for the products and services they use. Pricing isalso loyalty based; the more an institution uses SWIFT, the lower the per-unitcost (e.g. per message costs decrease as an institution’s traffic invoiceincreases).

Value basedThe right solution for the right need at the right price

FIN

InterAct

FileAct

Browse

SWIFT usage

Unit prices

HighLow

Loyalty basedThe more you use SWIFT,the lower your unit prices

Co-operative basedPrices decrease as cost effectiveness increases

1991 2002average message price

38

The various fees can be broken down into three categories:- joining and connecting to SWIFT- using SWIFT services and SWIFTSolutions- other SWIFT services

Joining and connecting to SWIFTInstitutions incur a variety of fees dependent on their status and type ofconnectivity:

Fee Definition

Joining fee One-time fee dependent on member,sub-member or participant status of the joining institution

SWIFT BIC (8 characters) - destination Annual recurring fee

SWIFT user handbook Annual recurring fee

FIN/SWIFTNet FIN logical terminal (LT) One-time fee

Security fee One-time and recurring fees related tothe registration and maintenance ofsecurity officers, PKI and BKEcertificates and/or USE equipment

SWIFT IP network connectivity fees Recurring fees dependent on the type of connectivity (managed or dial-up), the bandwidth and the country wherethe connection is implemented

SWIFT interfaces Dependent on whether institution usesSWIFT or 3rd party vendor interfaces

One-time and software maintenancerecurring fees dependent on volume of transferred traffic

Up-to-date fees for all of the above can be obtained by contacting yourSWIFT representative.

Using SWIFT services and SWIFTSolutionsFor FIN and SWIFTNet messaging, and for some of the new SWIFTNetbusiness solutions, fees are based on the volume and size of transferredmessages or files and are typically charged to the sender of the message(except when otherwise specified or agreed with SWIFT).

Note: some SWIFTSolutions are charged based on a flat service fee.

The price per message is typically defined according to the following criteria:- The institution’s global tier determined by the institution’s overall financial

contribution related to usage of SWIFT services. The more the institutionuses SWIFT services, the better the tier in terms of price per message.

39

- The route used by the transfer, either, domestic, international or intra-institution. The domestic route is defined by the country of the sender andthe receiver. Intra-institution traffic is the traffic transmitted betweendestinations that are part of the same financial institution. Internationalinter-institution traffic is all other communication.

- The optional value-added features selected for the transfer of message orfile (e.g. priority, delivery notification, etc).

- The size of the transferred message.

Up-to-date fees for all of the above can be obtained by contacting yourSWIFT representative.

Other SWIFT servicesSWIFT delivers directory, documentation and education services to itscommunity. Up-to-date fees, along with details of these services, can beobtained by contacting your SWIFT representative.

40

4. How can you connect to SWIFT? To be able to connect to SWIFTNet, users require:- a network connection to SWIFT's secure IP network (SIPN)- SWIFTNet Link- an interface

SWIFT users can choose to manage their own technical connectivity (directconnectivity) or they can outsource their connectivity either to a ServiceBureau or by the use of a shared connection (indirect connectivity).

Example of direct connectivity to SWIFT’s secure IP network (SIPN)

Customer premises Local loops Access networks

NetworkPartner 1

NetworkPartner 2

POP

M-CPE

VPNbox router

SIPN AccessNetwork

SIPNbackbonenetwork

SIPN

Backboneaccesspoints

OPCs

Backbone

41

Example of indirect connectivity to SIPN [via Service Bureau]

Diagram AcronymsVPN – Virtual Private NetworkM-CPE – Managed Customer Premises EquipmentPOP – Point of PresenceSIPN – Secure IP NetworkOPC – Operating Centre

Whether you choose to connect directly or indirectly is an internal businessdecision. It is SWIFT’s goal to ensure that all of its users have choice in thisrespect. Some of the points to consider as to whether to connect to SWIFTdirectly or indirectly are as follows:- Are you a global, regional or domestic institution?- Are you planning on expanding your physical presence in the future?- Do you have multiple business lines, or are you focused in one area?- Are you planning on expanding your business lines in the future?- Are your volumes high, or do you anticipate your volumes increasing in the

future?

4.1. Direct connectivityTo be able to use SWIFTNet services, you require a network connection toSWIFT's secure IP network (SIPN), SWIFTNet Link and an interface.

Secure IP network is SWIFT's highly secure and extremely reliable network.Full redundancy, advanced recovery mechanisms, first class operations andcustomer support services ensure continuous network availability forSWIFTNet services.

SWIFTNet Link guarantees interoperability between our customers.SWIFTNet Link is our unique underlying software module that encapsulatestransport, service management and security technologies.

SWIFTNet

Service bureauCustomer

A

CustomerB--

WANinternet

point to pointconnections

other

SWIFTNetinterface Connectivity

solution

CustomerN

VPNbox

VPNbox

SNL

42

Interface - The SWIFTAlliance product family includes interface products forboth SWIFTNet and FIN. SWIFTAlliance WebStation and SWIFTAllianceGateway are our SWIFTNet interface products. SWIFTAlliance Access andEntry are our FIN-specific interfaces. In addition to SWIFT’s own interfaceproducts, third party interfaces are also available from SWIFT’s servicepartners.

4.2. Indirect connectivityThere are two ways for a SWIFT user to connect indirectly to SWIFTNet:

A SWIFT-registered Service Bureau (SB) provides user facilities managementand / or data processing services, supporting their access to, and use of, theSWIFT messaging services. A Service Bureau may thus operate variousconnectivity components (such as a connection to the SWIFT network orinterface software) for the benefit of, or on behalf of the users for their prime and / or backup connection. For a current list of SWIFT registered ServiceBureaux, refer to www.swift.com.

A shared connection occurs whenever different SWIFT users connectthrough the same interface equipment to SWIFT in such a way that they couldbe simultaneously logged on.

What is the difference between Service Bureaux and shared connections?

Both offer the same indirect connectivity solution. However, in the case of ashared connection, the party operating the connection is also a SWIFT user,while in the case of Service Bureaux, it is not.

SWIFT provide a variety of connectivity options depending on eachindividual customer’s needs and requirements, ranging from fully resilientand redundant permanent connections down to dial-up connections, eitherdirectly or indirectly. For detailed information on how you can connect toSWIFT, please contact your SWIFT representative.

44

5. SWIFT Partner SolutionsSWIFT Partner Solutions is responsible for establishing and maintainingbusiness relationships at all levels between SWIFT and external partnervendors. One of our main aims is to improve communication and the sharingof information between SWIFT and providers of applications and services forthe Investment Management Industry.

Partner solutions works with third-party providers who develop and supportsolutions that focus on SWIFT readiness, traffic automation and straightthrough processing to help our customers achieve end-to-end automation.

SWIFT traditionally works with various partners to extend its product offeringbeyond the network and messaging layers.- Application vendors- Consultants- Interface providers- Installation experts

Partner Solutions' objectives are to:- Facilitate SWIFTNet implementation for members - Increase STP and reduce total cost of ownership to members - Leverage SWIFT’s business potential through its partners network

Over 60 partner companies active in the investment management industryhave been identified. Partner Solutions will seek to work with these vendorswithin the framework of our established programmes and projects, asdescribed further in this section.

45

5.1. Vendor segmentationPartner solutions typically segment the vendor community in the following way:

Network, connectivity

Co

nsulta

ncy /

Inte

gra

tion s

erv

ices

Banking

Business applications

Messaging

Market

infrastructure

service

providers

Middleware

Securities ERP

Interfaces

Vendor segment focusing on the investment management industry

Solution stack provided by SWIFT and by third party providers

Solution stack provided by SWIFT

46

The securities business applications are obviously highly relevant for theinvestment management community.

The types of business applications identified as key for this industry are:- In the pre-trade/trade space: FIX engines and Order Management Systems- In the post-trade/pre-settlement space: FIX engines, Order Management

Systems, ETC providers and reconciliation applications- In the clearing and settlement space: back office platforms and

reconciliation applications- In the custody space: corporate actions processing

The investment funds distribution vendor landscape is slightly different asniche players have been developing extremely focused business applicationscatering for the specific needs of distribution, fund accounting and transferagency.

Partner solutions identified the following application types as highly relevantfor the mutual funds industry (in addition to the ones relevant for theinvestment management industry generically):- Distribution platforms- Transfer agency applications- Fund accounting systems- Portfolio management applications

The middleware or EAI stack is the main component involved in the gatheringof the business flows and the construction of the messages. This applicationcategory is spanning multiple spaces (also for funds distribution) and servesas the concentrator and transformer of business flows beyond the interface.

The market infrastructure service providers are traditionally seen as technicalinfrastructure providers. Nevertheless, these are extremely relevant for theinvestment management community, and Partner Solutions carefully monitorthe evolution within this partner segment.

The consultancy and integration services stack would intervene at all stagesin an implementation process (architecture, business analysis, testing, etc).

5.2. Global label programmePartner solutions' global label programme certifies third party applicationsthat support SWIFT functionality and messages, through validating theintegration of third party applications into SWIFTAlliance interfaces, andaccrediting providers of SWIFT-related services.

For the securities industry, labels have been awarded to third-party providerswho have developed solutions covering specific securities processes andSWIFTNet Business Solutions, including the following:- Securities Custody and Settlement- Corporate Actions- SWIFTNet FIX- Securities Reconciliation- SWIFTNet Funds

47

The following labels support the investment management industry, but alsospan multiples industries:- SWIFTReady Financial EAI: targeted at middleware providers- Provider of SWIFT Accredited Solutions: targeted at consultancy houses

and integration specialists

For details on SWIFT’s current range of Partners, please contact your SWIFTrepresentative, or go to www.swift.com.

5.3. Working groups and vendor supportIn the context of specific business solutions and initiatives, Partner Solutionsalso engage in closer relationships with niche players to ensure that eachsolution being rolled out is understood by its partners and well implemented.

SWIFT also involved these specialist partners in the validation and review ofspecific business solutions deliverables through the creation of workinggroups.

The SPIFA (SWIFT Partner Investment Funds Automation) working group iscomposed of 15 companies helping us refine our SWIFTNet Funds businesssolution. As this solution has multiple facets and tackles multiple businessflows, SWIFT carefully selected key players in the funds industry, includingconsultancy houses, middleware and business applications providers fortransfer agencies, fund accountants or distributors.

More generically, one of the key missions of Partner Solutions is to ensurethat at least three vendors support each business solution or initiative thatSWIFT is rolling out.

48

6. About standardsStandards are an essential element of SWIFT's global offering. We arecommitted to the collaboration of efforts and convergence of standards, sothat you can benefit from cost savings, eliminate redundancies and seize theopportunity to expand into previously untapped markets.

SWIFT offers a range of securities standards, in both FIN and XML syntax,which facilitate the link between front and back office operations of financialinstitutions. This leads to interoperability and higher straight-through-processing (STP) rates throughout the entire securities, payments andtreasury transaction chains.

In order to achieve a common industry standard for the financial industry,SWIFT works in close co-operation with the international standards settersand several financial industry bodies, including ISO, the Securities MarketPractice Group and FIX Protocol Ltd.

This section highlights some of these organisations and how we work withthem, along with an overview of the industry’s standards convergence efforts.

6.1. International organisation for standardisation (ISO)ISO is the world's largest developer of standards. ISO is a network of thenational standards institutes of 148 countries with a Central Secretariat inGeneva, Switzerland that co-ordinates the system.

SWIFT is the registration authority for a number of ISO standards related tofinancial operations including the BIC (Bank Identifier Code), the MIC (MarketIdentifier Code), the ISO 15022 securities message standard and the newUNIFI (ISO 20022) financial message standard.

6.2. Securities market practice group (SMPG)SWIFT acts as a facilitator to the SMPG. The objective of this industry groupis to create globally harmonised market practices, which enhance STP at anindustry level.

Securities market practicesMarket Practice Rules for existing securities messaging standards (e.g. FIX,ISITC, and ISO 7775) have been historically defined after industry participantshave implemented the standards. To further complicate industry informationflows, each industry participant has defined its own usage rules separatelyand differently. This has resulted in an inefficient exchange of informationwhereby standards and their associated market practice rules have beeninterpreted and implemented differently by each industry participant in eachgeographic market. This inefficient exchange of information has limited (STP)in the securities industry.

49

SMPGIn July 1998, SWIFT sponsored the organisation of the SMPG. The formationof the SMPG resulted in the establishment of National Market PracticeGroups (NMPG) in more than 30 geographic markets comprised ofinvestment management institutions, broker / dealers, custodian banks,central securities depositories and regulators. The membership of the SMPGand the NMPGs are committed to the vision that standards, in conjunctionwith defined market practices, will bring the industry closer to its goal ofachieving STP.

The SMPG is a tactical initiative focused on enhancing the current securitiesindustry infrastructure. However, this group also realises the further benefit ofindustry utilities in supporting conformance to standards and market practice.As such, there is active dialogue between the SMPG and other industryinitiatives (e.g. ISITC-IOA) in order to ensure that the tactical work of theSMPG provides a first step toward the restructuring of the securities industry.

SMPG processThe SMPG is open to all participants interested in creating globally agreedmarket practices for the securities industry. This objective includes theharmonisation of non-regulated geographic differences as well as consistentimplementation by securities industry participants for processing within andacross all markets. Monthly meetings of the NMPGs and twice-yearlymeetings of the SMPG cover issues ranging from standardised methods ofinforming custodians to register shares, to creation of NMPGs in non-participating countries.

NMPG countries — as of January 2004Austria, Australia, Belgium, Brazil, Denmark, Canada, Croatia, CzechRepublic, Finland, France, Germany, UK and Ireland, Greece, Hong Kong,Hungary, India, Israel, Italy, Japan, Luxembourg, Malaysia, Netherlands,Norway, Portugal, Poland, Russia, Singapore, South Africa, South Korea,Spain, Sweden, Switzerland, Thailand, Turkey, United States and theEurobond Markets.

Further information on the SMPG is available from www.smpg.info.

6.3. Standards convergenceThere are numerous message development initiatives addressing financialinformation flows, driven from both inside and outside the financial industry.They are generally driven by communities of users looking for more cost-effective communications to support specific financial business processes.

It is possible to preserve interoperability and consistency between standardsdeveloped by different organisations, if a common standardisation approachis adopted. Such a common standardisation approach has to include acommon message development methodology, a common validation /prioritisation process and a common financial repository. The internationalstandards setters, such as ISO and UN/CEFACT, are guiding the industrytowards the standard use of methodologies and tools.

50

SWIFT’s strategic priority supports this convergence at three levels:- SWIFT is actively supporting ISO and UN/CEFACT in the development of a

common approach and has offered to be the Registration Authority for thecommon financial repository

- SWIFT is committed to use this common approach and promotes it activelyto other standards initiatives developing financial messages

- SWIFT makes every effort to select relevant standards initiatives to supportand avoid duplication of efforts by Financial Institutions in multiplestandards initiatives that would cover the same financial transactions

The adoption of such a common standardization approach by as manymessage developers as possible will prevent the development ofinconsistent, non-interoperable and overlapping message standards, whilstallowing a large degree of freedom for message development initiatives toemerge and prosper.

The target is the harmonization of all messages sent and received by financialinstitutions, between themselves, with their clients and with the marketinfrastructures that participate in the execution of financial transactions.

FIX protocol limited (FPL)Co-operation with FPL is key to convergence of securities messagestandards between the front and back offices. While the SWIFTNet FIX Huballows SWIFT to transport FIX messages, the ultimate goal is to provide a fullset of securities messages in the same XML language. In 2001 SWIFT andFPL signed a memorandum of understanding. Since then, SWIFT and FPLhave contributed jointly to the development and approval of the ISO 20022standard.

Under the ISO umbrella, SWIFT and FPL have developed a set of ISO 20022compliant pre-trade / trade message models, which are expected to beavailable in late 2004. Future efforts between SWIFT and FPL will focus onthe development of message models in the post trade / pre-settlementspace.

FIX representatives are also working with SWIFT (as well as several industryplayers) on the new investment funds messages, being developed incompliance with the ISO 20022. The first set of investment funds messagestandards are now complete, and will be available for use on SWIFT in late2004.

FpML / ISDACo-operation with FpML (financial products mark-up language) is key to theconvergence of standards for the OTC FX and interest rate derivativesbusiness. FpML are a part of ISDA (International Swaps and DerivativesAssociation) of which SWIFT is a member. FpML have already starteddefining an XML directory for OTC derivatives and SWIFT are working withthem to promote an adoption of the ISO 20022 methodology.

Market data definition language (MDDL)MDDL was launched in 2001 by the Financial Information Services Division(FISD) of the Software & Information Industry Association (SIIA). MDDL’s aim

51

is to build XML standards covering pricing information and reference data forfinancial instruments. From its inception MDDL has evolved in parallel withthe development of the ISO 20022, and is looking to become ISO 20022compliant.

To ensure the convergence of standards in this area, SWIFT helped MDDL togain access to ISO, and have supported the creation of a new ISO workinggroup (WG11), which is creating an ISO 20022 compliant market data modelfor pricing information and reference data.

6.4. Bank identifier code (BIC)The ISO Bank Identifier Code (BIC) is an international standardised methodfor identification of financial institutions. The BIC is designed to facilitateautomatic processing of telecommunication messages in financialenvironments.

SWIFT is the Registration Authority for ISO 9362 Banking – BankingTelecommunication Messages – BICs. SWIFT in this capacity is responsiblefor the assignment of these codes and their subsequent publication in the BICDirectory.

Each SWIFT User registers a unique 8 character Bank Identifier Code (BIC).Such registration is completed when the organisation applies to become aSWIFT User.

An entity may register separate 11 character codes where the last 3characters represent a branch code, either of a geographical, functional ordepartmental nature. However, if the branch being registered is considered aseparate legal entity, then it must be registered with its own 8 character BIC.

52

7. Industry co-operationSWIFT works with a variety of regulatory bodies, industry groups as well asour customers to help drive standardisation and automated communicationsforward in the financial industry.

7.1. Board committees and working groupsSWIFT is governed and guided by its users (many of whom are shareholdersin SWIFT), and by its Board. As our users represent a broad industry base,the Board has six committees with delegated decision powers: audit andfinance, banking and payments, compensation, securities, standards,technology and production.

The Securities Steering Committee (SSC) is made up of senior industryrepresentatives from leading investment management institutions, custodians,broker / dealers and international central securities depositories. The SSCmeet on a quarterly basis to discuss issues affecting the securities industry,and guide SWIFT as to how it is best placed to deal with these issues in themost beneficial manner for the Industry.

Additionally, SWIFT has created Working Groups to assist Board Committeeson detailed industry matters. As with the SSC, the Working Group is likewisemade up of senior representatives from the securities industry, and also meetson a quarterly basis.

7.2. National member groupThe National Member Group (NMG) consists of all SWIFT shareholders withinthe same nation. Within each nation shareholders organise themselves insuch a manner so that they can effectively advise and assist the Board onspecific local matters such as admission of new users, propose Directorcandidates to the Board, communicate and work with their representative onthe Board of Directors.

The NMG is consulted in an advisory function at a national level on policyissues affecting members which are due to be discussed in the Board, suchas share participation or new categories of SWIFT Users. In doing so, theNMG not only assists the Board, but also serves the interests of its membersby co-ordinating their views and formulating a common policy. The NMGensure that their advice to the Board is objective and competitively neutral,and that the local criteria are drafted to provide fair and open access toSWIFT services to any eligible institution.

53

7.3. National user groupsThe National user group consists of all SWIFT Users within the same nationwho organise themselves to discuss SWIFT matters of an operational nature.They develop a forum to allow for collective planning and co-ordination in theiroperational activities. The prime functions of the National User Group are:- to enable users to co-operate in establishing their connections to SWIFT- to advise organisational, operational or technical matters affecting the users- to discuss and decide on matters which have to be agreed upon at a

national level as they relate to the day-to-day network operation in thecountry (e.g. sharing of costs)

- to assist SWIFT in ensuring an efficient and reliable day-to-day operation of the network

The national user group is chaired by the user group chairperson (UGC). Tofulfil this role, the UGC should be well versed in operational and technicalmatters relating to SWIFT's operation and be in close contact with the userson an operational level. The UGC also acts as focal point for trainingrequirements. In most countries the UGC is elected by the National MemberGroup or by the steering committee of that National Member Group.

7.4. Industry bodies & regulatory authoritiesSWIFT plays an active role in working with (and / or ensuring compliancewith) various industry bodies and regulatory authorities around the world.These include the following:

FIX protocol limited (FPL)FPL is an industry organisation created in 1992, which has built successfulmessage standards for communication primarily in the pre-trade / trade area.FPL’s membership is made up of many of the key buy-side and sell-sideplayers in the securities industry, along with a number of key vendors of FIXrelated services. SWIFT is a member of FPL.

As mentioned previously in the standards Convergence section, SWIFT andFPL have developed a set of ISO 20022 compliant pre-trade / trade messagemodels, which are expected to be available in late 2004. Future effortsbetween SWIFT and FPL will focus on the development of message modelsin the post trade / pre-settlement space.

G30The Group of Thirty is a private, not-for-profit, international body composedof senior representatives of the private & public sectors and academia. Itaims to deepen understanding of international economic and financial issues,to explore the international repercussions of decisions taken in the public andprivate sectors, and to examine the choices available to market practitionersand policymakers.

54

In January 2003 the G30 published a set of 20 recommendations for thesecurities industry (global clearing and settlement: a plan of action). TheG30 have called for comprehensive reform of the cross-border clearing andsettlement process. These recommendations are in unison with how SWIFToperates, and the value SWIFT offers to its users. Cross-border clearing andsettlement processes have been at the core of SWIFT’s securities offering formore than ten years.

“The importance of the clearance and settlement processes as the centralnervous system of global finance is clear, and there is a compelling needfor all institutions that are engaged to ensure that they contribute tosecuring the system's health." G30

ISSAThe International securities services association (ISSA) is a group of leadingglobal market players, who as a group control a significant share of cross-border investment volume. The associations focus is twofold, firstly to collectand disseminate information on the developments in the rapidly changinginternational securities markets, and secondly to offer securities operationalprofessionals a forum to exchange ideas and issues of common interest.SWIFT is an active participant of ISSA.

ISITC-IOAThe international securities association for institutional tradecommunication – international operations association (ISITC-IOA) is aglobal working committee of securities operations professionals representingcustodian banks, investment managers, brokers and vendors. The group’smission is to foster alliances and advocate standards that promote straightthrough processing (STP) of securities transactions. SWIFT is a member ofISITC-IOA.

FEFSIThe fédération européenne des fonds et sociétés d’investissement (FEFSI)is the pan-European umbrella organisation of the investment funds industryfor Austria, Belgium, the Czech Republic, Denmark, Finland, France,Germany, Greece, Hungary, Ireland, Italy, Liechtenstein, Luxembourg, theNetherlands, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden,Switzerland and the United Kingdom. FEFSI represents through its nationalmember associations more than 900 investment management companieswith over 40,000 investment funds.

SWIFT are actively involved with FEFSI, specifically as a member of thesteering group of the Funds Processing Standardisation Group (FPSG), forwhich there are two key areas of focus. Firstly, support of ISO 20022 as thebasis for European funds messaging standards. Secondly, the harmonisationof processing features (e.g. decimal spaces, cut off times, etc.).

55

Giovannini groupThe Giovannini Group is a group of financial-market participants, under thechairmanship of Alberto Giovannini (chairman - Unifortune AssetManagement SGR), which advises the European Commission on financialmarket issues. The Group has focused its work on identifying inefficienciesin EU financial markets and proposing practical solutions to improve marketintegration.

The Group has issued four reports, the last of which focused on EU cross-border clearing and settlement arrangements. It highlighted the fragmentednature of the EU clearing and settlement infrastructure for cross-bordertransactions, and made several recommendations for the removal of barriersthat would lead to the improvement of the current environment.

"The definition of formats and protocols (for standards in financialcommunications) should build on the work already accomplished bySWIFT and the Securities Market Practice Group with the aim of removingthe difficulties caused by proprietary systems and free data fields.”Giovannini

Basel II committeeThe Basel Committee on Banking Supervision is recommending its NewBasel Capital Accord (known as Basel II). The New Accord calls for minimumcapital requirements along with a supervisory review of capital adequacy. Animproved capital adequacy framework is intended to promote a strongeremphasis on risk management, with the main focus being on operational risk.

While use of ISO standards facilitate reduced operational risk, throughincreased automated processing, SWIFT are continuing to develop newsolutions required by its users. The SWIFTNet Cash Management solutionfor instance, allows clients to receive nostro account positions andtransactions in real-time through their correspondent banks, therebyimproving intra-day exposure monitoring.

“Operational risk is the risk resulting from inadequate or failed internalprocesses, people and systems or from external events.” Basel II

7.5. Sibos – financial services forumSibos is the world’s premier financial services forum, attracting the industry’sleading figures and firms. Sibos draws over 6,000 participants from thefinancial industry, and some 200 application and middleware vendors, systemintegrators and consultants. It takes place annually, typically a week inSeptember or October, at a different venue around the world.

Sibos brings to the fore issues that are challenging the financial servicesindustry, now and in the future - new technologies, new processes, newclient expectations, new and unexpected alliances and ever-growingpressures for greater efficiency and security.

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One of the key advantages of Sibos is the ample opportunity attendees haveto network. Sibos delegates cover the range of financial markets and IT,making them the ideal audience for focused marketing activities. Investmentmanagement institutions, broker-dealers, custodians, treasury specialists,banks, and operations professionals, all see Sibos as an excellent investmentin time.

The securities industry has taken an increasingly high profile role at Sibos. Inrecent years we have seen a rising number of investment managementinstitutions represented at Sibos, not only in terms of attendance, but also interms of participation on various panel discussions and as keynote speakers.

For up to date details of Sibos, see www.swift.com.

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8. About SWIFT8.1. Our visionTo be the global financial community’s foremost messaging infrastructure thatis lowest risk and highest resilience.

To achieve this we will harness what has been called ‘one of the dominantfranchises of our network age’ and tap the enormous potential of thatfranchise for the benefit of our worldwide community of members.

8.2. Our missionSWIFT is a worldwide community of financial institutions whose purpose is tobe the leader in communications solutions enabling interoperability betweenits members, their market infrastructures and their end-user communities.

SWIFT will: - Work in partnership with its members to provide low-cost, competitive

financial processing and communications services of the highest securityand reliability

- Contribute significantly to the commercial success of its members throughgreater automation of the end-to-end financial transaction process, basedon its leading expertise in message processing and financial standardssetting

- Capitalise on its position as an international open forum for the world’sfinancial institutions to address industry-level threats, issues andopportunities

- Employ and recruit the best people, invest in the most beneficial resources,and become a leading global organisation respected for its professionalism,effectiveness, vision and management

8.3. Facts and figuresAs at the end of 2003, SWIFT is being used more than ever by the globalfinancial community:- More than 7,500 financial institutions, in 200 countries, are using SWIFT- 72 of the top 100 investment management institutions (IMIs) by assets

under management are connected to SWIFT- 2003 traffic surpassed two billion messages (35% related to securities

transactions)

8.4. SWIFT: history & evolutionIn 1973, banks communicated via telex - not very secure, minimumstandards and little if any automation. So, 239 banks from 15 countriesformed a co-operative to automate the telex. They called it the Society forWorldwide Interbank Financial Telecommunication (SWIFT). Their vision was

59

to harness emerging computer technology and manoeuvre around thetelecommunications monopolies to send standardised financial messagesbetween themselves, securely and reliably. They hoped one day that the dailymessages would grow to 300,000 each day.

The table below provides some of the highlights of SWIFT’s history over thepast 30 years.

Year Users Countries Messages Highlights

1973 239 15 0 SWIFT is established

1977 518 22 3.4 million First live message

1978 586 25 21.6 million The first Sibos is held in Brussels

1982 1,017 44 79.9 million Introduction of message textstandards for certain interbanksecurities transactions

1987 2,360 64 222 million Broker/dealers, exchanges, centraldepositories and clearing institutionsallowed to join SWIFT

1990 3,049 83 332 million Securities traffic (the new Category 5messages) represents 2% of totalmessage traffic

1992 3,582 94 405 million IMIs become eligible to join SWIFT

1994 4,625 126 518 million Bank of England selects SWIFT asone of two network providers forCREST (UK central securitiesdepository)

1996 5,632 151 688 million Electronic trade confirmationproviders become eligible to joinSWIFT

1997 6,176 164 812 million SWIFT announces the nextgeneration programme, based on anew, highly secure, extremely reliableIP network

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Year Users Countries Messages Highlights

1998 6,557 178 937 million The SWIFT board transforms thesecurities board task force into thesecurities steering council (IMIs areinvited to join the council)

ISO approves the new draft securities message standard – ISO 15022

Proxy voting agencies becomeeligible to join SWIFT

1999 6,797 189 1.06 billion Securities traffic represents 21% oftotal message traffic

2001 7,457 196 1.53 billion Insurance companies andgovernment institutions carrying outan IMI role become eligible to joinSWIFT

2002 7,601 198 1.82 billion Fund administrators are eligible tojoin SWIFT

2003 7,725 200 2 billion Migration from ISO 7775 securitiesmessage standard to the new ISO15022 standard is completed

SWIFT develops a new XMLmessage based solution forinvestment funds

SWIFT launches the SWIFTNet FIXservice

SW

IFT’

s P

rodu

cts

& S

ervi

ces

Section 3:SWIFT’s products & services

1. Securities markets (ISO 15022) - category 5 on FIN 621.1. Securities markets - pre-trade / trade 641.2. Securities markets - post trade / pre-settlement 651.3. Securities markets - clearing & settlement 671.4. Securities markets - custody services: securities reporting 731.5. Securities markets - custody services: corporate actions / entitlements 771.6. Securities markets - custody services: depositary receipts 801.7. Securities markets - custody services: securities lending & borrowing 811.8. Securities markets - custody services: collateral management 832. SWIFTNet FIX 882.1. SWIFTNet FIX: pre-trade 902.2. SWIFTNet FIX: trade 912.3. SWIFTNet FIX: allocation 912.4. SWIFTNet FIX: confirmation 933. SWIFTNet Funds 943.1. SWIFTNet Funds – orders / switches & confirmations 983.2. SWIFTNet Funds - reporting & custody: NAV / price reporting 1073.3. SWIFTNet Funds - reporting & custody: cash flow reporting 1093.4. SWIFTNet Funds - transfers 1113.5. SWIFTNet Funds - reporting & custody: account reporting 1113.6. SWIFTNet Funds - account management 1113.7. SWIFTNet Funds - reporting & custody: commissions reporting 1113.8. SWIFTNet Funds - reporting & custody: static data reporting 1113.9. SWIFTNet Funds - reporting & custody: account reporting 1123.10. SWIFTNet Funds - reporting & custody: corporate actions 1124. Payments & cash management 1144.1. Customer payments 1154.2. Financial institution transfers 1164.3. Cash management and customer status 1195. Treasury Markets: FX, money markets, FX options & derivatives 1245.1 Foreign exchange (FX) 1265.2 Money markets 1295.3 OTC derivatives 1316. CLS third party service 1367. SWIFTNet Accord 1387.1. Matching 1387.2. Netting 1398. SWIFTNet Cash Reporting 1429. File transfer capabilities 14410. New initiatives 14610.1. Market data provider initiative 146

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1. Securities markets (ISO 15022) -category 5 on FIN

The core of SWIFT’s offering to its Securities users is the ISO 15022 messagestandards. ISO 15022 message standards cover the equity, fixed income &listed options functions from Trading through to Custody Services. AdditionalISO 7775 messages are used to cover Securities Lending & Borrowingfunctions.

The flows shown in this section represent the main use of each message. Fulldetails explaining the use of each message can be found in the SWIFT UserHandbook.

MT Message name Page

Pre-trade / Trade 64

502 Order to buy or sell 64

509 Trade status 64

513 Client advice of execution 65

Post trade / Pre-settlement 65

514 Trade allocation instruction 65

515 Client confirmation of purchase or sale 66

517 Trade confirmation affirmation 66

Clearing & settlement 67

508 Intra-position advice 67

524 Intra-position instruction 67

540 Receive free instruction 68

541 Receive against payment instruction 68

542 Deliver free instruction 69

543 Deliver against payment instruction 69

544 Receive free confirmation 70

545 Receive against payment confirmation 70

546 Deliver free confirmation 71

547 Deliver against payment confirmation 71

548 Settlement status and processing advice 72

578 Settlement allegement 72

63

Custody services: Securities reporting 73

535 Statement of holdings 73

536 Statement of transactions 73

537 Statement of pending transactions 74

538 Statement of intra-position advices 74

549 Request for statement / Status advice 75

575 Report of combined activity 75

576 Statement of open orders 76

584 Statement of ETC pending trades 76

586 Statement of settlement allegements 77

Custody services: Corporate actions / Entitlements 77

564 Corporate action notification 77

565 Corporate action instruction 78

566 Corporate action confirmation 78

567 Corporate action status & processing advice 79

568 Corporate action narrative 79

Custody services: Depositary receipts 80

587 Depositary receipt instruction 80

588 Depositary receipt confirmation 80

589 Depositary receipt status & processing advice 81

Custody services: Securities lending & borrowing 81

516 Securities loan confirmation 81

526 General securities lending / Borrowing message 82

581 Collateral adjustment message 82

582 Reimbursement claim or advice 83

Custody services: Collateral management 83

503 Collateral claim 83

504 Collateral proposal 84

505 Collateral substitution 84

506 Collateral and exposure statement 85

507 Collateral status and processing advice 85

527 Tri-party collateral instruction 86

558 Tri-party collateral status and processing advice 86

569 Tri-party collateral and exposure statement 87

64

1.1. Securities markets - pre-trade / tradeThese messages are typically sent between a client (e.g. investmentmanagement institution) and a financial institution (e.g. broker / dealer) toinstruct a buy or sale of a security, to provide the status of the trade, and toconfirm the trade between the two parties.

MT 502 Order to buy or sell - To instruct the purchase or sale of a givenquantity of a particular financial instrument.

MT 509 Trade status - To indicate the status of a particular trade.

Instructing

party

Executing

party

Order to buy or sell

Request cancellation of previous order

Replace previously sent order

Copy to third party Copy to third party

Re-send an order

Instructing

party

Executing

party

Advice status of trade

Cancel previously sent advise of status

Reject previously received message


65

MT 513 Client advice of execution - To provide brief and early information tothe Instructing Party about a deal executed at its instruction. This advice ofexecution applies to a deal that cannot yet be fully confirmed (e.g. a blocktrade which is to be allocated).

1.2. Securities markets - post trade / pre-settlementThese messages are typically sent between a client (e.g. investmentmanagement institution) and a financial institution (e.g. broker / dealer) orservice provider (e.g. electronic trade confirmation provider) to provide earlyinformation about a deal, to instruct the allocation of a block trade, to confirmthe details of a trade, and to affirm the details of confirmed trade.

MT 514 Trade order allocation - To instruct the allocation of a block trade.Each message can only contain one allocation. Settlement details are optionaland can be provided where standing instructions do not apply, or are notavailable.

Instructing

party

Executing

party

Advice of execution

Re-sent previously sent advice

Cancel previously sent advice of execution


Instructing

party

Executing

party

Instruct allocation of block trade

Request cancellation of previous allocation instruction

Provide pre-allocation details linked to an order


Re-send a previously sent allocation

66

MT 515 Client confirmation of purchase or sale - To confirm the details of apurchase or sale. It is also used to provide details on the payment side of thetransaction. Where legally accepted, this message serves as a bindingelectronic contract note.

MT 517 Trade confirmation affirmation - To positively affirm the details of apreviously received confirmation or contract note. The trade confirmationdetails that are affirmed bind the Sender and Receiver.

Instructing

party

Executing

party

Confirm details of purchase or sale

Request cancellation of previous client confirmation

Re-send a previously sent confirmation


Instructing

party

Executing

party

Positive affirmation of previously received confirmation


67

1.3. Securities markets - clearing & settlementThese messages are typically sent between a client (e.g. investmentmanagement institution) and a financial institution (e.g. Custodian) or serviceprovider (e.g. Electronic Trade Confirmation Provider) to provide settlementinstructions, and confirmations of settlement.

MT 508 Intra-position advice - To confirm the increase or decrease in thenumber of securities of a certain status within a holding (e.g. movements fromone sub-balance to another sub-balance within the same account).

MT 524 Intra-position instruction - To instruct the movement of securitieswithin the holding (e.g. re-registration of securities from one sub-balance toanother sub-balance).

Account

servicer

Account

owner

Intra-position advise

Intra-position confirmation

Request cancellation of previously sent advice


Re-send a previously sent advice

Account

servicer

Account

owner

Instruct intra-position movement of securities

Request cancellation of a previously sent instruction

Re-send a previously sent instruction


68

MT 540 Receive free instruction - To instruct the receipt of financialinstruments, free of payment, from a specified party.

MT 541 Receive against payment instruction - To instruct the receipt offinancial instruments, against payment, from a specified party.

Account

servicer

Account

owner

Instruct receipt of securities 'free of payment'

Pre-advice of a forthcoming instruction

Request cancellation of previously sent instruction



Account

servicer

Account

owner

Instruct receipt of securities 'against payment'





69

MT 542 Deliver free instruction – To instruct a delivery of financialinstruments, free of payment, to a specified party.

MT 543 Delivery against payment instruction - To instruct a delivery offinancial instruments, against payment, to a specified party.

Account

servicer

Account

owner

Instruct delivery of securities 'free of payment'





Account

servicer

Account

owner

Instruct delivery of securities 'against payment'





70

MT 544 Receive free confirmation - To confirm a receipt of financialinstruments, free of payment, from a specified party.

MT 545 Receive against payment confirmation - To confirm the receipt offinancial instruments against payment from a specified party.

Account

servicer

Account

owner

Confirm a receipt of securities 'free of payment'

Pre-confirm a receipt of securities 'free of payment'

Confirm partial settlement




Account

servicer

Account

owner

Confirm a receipt of securities 'against payment'

Pre-confirm a receipt of securities 'against payment'


Request cancellation of previously sent confirmation



71

MT 546 Deliver free confirmation - To confirm a delivery of financialinstruments, free of payment, from a specified party.

MT 547 Deliver against payment confirmation - To confirm a delivery offinancial instruments against payment to a specified party.

Account

servicer

Account

owner

Confirm a delivery of securities 'free of payment'

Pre-confirm a delivery of securities 'free of payment'





Account

servicer

Account

owner

Confirm a delivery of securities 'against payment'

Pre-confirm a delivery of securities 'against payment'





72

MT 548 Settlement status and processing advice - To advise the status of asettlement instruction, or as a reply to a cancellation request previously sentby the Account Owner.

MT 578 Settlement allegement - To advise the Account Owner that aCounterparty has alleged a settlement instruction against the AccountOwner's account with the Account Servicer, and that the Account Servicercould not find the corresponding instruction from the Account Owner.

Account

servicer

Account

owner

Advise status of a previously received instruction

Report on future settlement or forward transaction


Re-send a previously sent statement


Account

servicer

Account

owner

Settlement allegement

Request cancellation of a previously sent allegement

Re-send a previously sent settlement allegement


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1.4. Securities markets - custody services: securities reportingThese messages are typically sent between a client (e.g. investmentmanagement institution) and a financial institution (e.g. custodian) to providedetails of account activity and holdings.

MT 535 Statement of holdings - To report on the quantity and identificationof securities and other holdings which the Account Servicer holds for theAccount Owner at a specified moment in time.

MT 536 Statement of transactions - To provide the details of any increases and / or decreases of holdings, which may have occurred over a specifiedperiod of time, for all, or a selected quantity of securities in the requestedsafekeeping account which, the Account Servicer holds for the AccountOwner.

Account

servicer

Account

owner

Statement of holdings

Request cancellation of previously sent statement



Account

servicer

Account

owner

Statement of transactions




74

MT 537 Statement of pending transactions - To provide the Account Ownerwith the details of pending increases and / or decreases in the quantity ofholdings, at a specified moment in time. The message may contain details forall, or a selected quantity of securities for a specified safekeeping account. Itmay also give all, or a selected number of reasons why the transaction ispending.

MT 538 Statement of intra-position advices - To provide the Account Ownerwith the details of any intra-position transfers (movement of securities within aholding) for a specified period of time, for all, or selected securities in aspecified safekeeping account.

Account

servicer

Account

owner

Statement of pending transactions




Account

servicer

Account

owner

Statement of intra-position advices




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MT 549 Request for statement / Status advice - To request a statement orstatus messages (e.g. MT 509, 535, 536, 537, 538, 575, 576, 584, 586, and589). The request for a statement / status advice can be used as a querymessage to gather information for one account, at a given date or period oftime.

MT 575 Report of combined activity - To report on all securities and cashactivity for a given combination of safekeeping and cash accounts. Thismessage is intended to provide a summary of all cash and securities activityfor a given safekeeping account linked to one (or multiple) cash accounts, orfor a given cash account linked to multiple safekeeping accounts.

Account

servicer

Account

owner

Request for statement/status advice


Account

servicer

Account

owner

Statement of combined activity

Request cancellation of a previously sent statement



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MT 576 Statement of open orders - To identify orders which have not yetbeen fully executed.

MT 584 Statement of ETC pending trades - To identify transactions whichhave not yet been matched or affirmed. It provides details for all, or selectedsecurities in all, or selected safekeeping accounts / sub-accounts, givingreasons why the transaction is pending.

Send a statement


Re-send of previously sent statement


Instructing

party

Executing

party

Copy to third party

Statement of allocations

not yet matched or confirmed

Statement of trade confirmations

not yet affirmed

Statement of

trade confirmations

not yet matched

Send a statement Send a statement

Cancel a

previous statement

Cancel a

previous statement

Client-side Market-side

Instructing

party

Trade

counterparty

Executing

party

Electronic

trade

confirmation

service

provider

77

MT 586 Statement of settlement allegements - To provide the details ofpending settlement allegements, for all or selected securities in a specifiedsafekeeping account.

1.5. Securities markets - custody services: corporate actions / entitlements

These messages are typically sent between a client (e.g. investmentmanagement institution) and a financial institution (e.g. Custodian) to providedetails of corporate actions affecting a particular account, and instructions onvoluntary events.

MT 564 Corporate action notification - To provide an Account Owner withthe details of a corporate action event. It may include possible elections orchoices available to the Account Owner. The MT 564 can initially be sent as apreliminary advice, and subsequently replaced by another MT 564 withcomplete or confirmed information. The message will also be used to providethe Account Owner with a calculation of the impact a corporate action eventwill have on a safekeeping or cash account.

Account

servicer

Account

owner

Statement of pending settlement allegements


Request cancellation of a previously sent statement


Account

servicerAccount

owner

Preliminary notification

Replace a previously sent notification

Request cancellation of previous notification

Withdrawal of offer or event

Replace previously sent notification with entitlement

Reminder of deadline

Re-send a previously sent notification

Copy to third party

78

MT 565 Corporate action instruction - To provide the Account Servicer withinstructions on how the Account Owner wishes to proceed with a corporateaction event. Instructions include investment decisions regarding the exerciseof rights issues, the election of stock, or cash, when the option is available,and decisions on the conversion or tendering of securities.

MT 566 Corporate action confirmation - To confirm to the Account Ownerthat securities and / or cash have been credited / debited to an account, asthe result of a corporate action event.

Account

servicer

Account

owner

Corporate action instruction

Request cancellation of a previous instruction

Replace previously sent instruction

Re-send previously sent instruction

Copy to third party

Account

Servicer

Account

owner

Corporate action confirmation

Reverse a previously sent confirmation


Copy to third party

79

MT 567 Corporate action status & processing advice - To advise the status,or a change in status, of a corporate-action-related transaction previouslyinstructed by, or executed on behalf of, the Account Owner.

MT 568 Corporate action narrative - To provide complex instructions ornarrative details relating to a corporate action event.

Account

servicer

Account

owner

Advise status of corporate action

Resend a previously sent confirmation advice

Copy to third party

Account

servicer

Account

owner

Corporate action narrative

Cancel a previously sent narrative

Re-send a previously sent narrative


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1.6. Securities markets - custody services: depositaryreceipts

These messages are typically sent between the owners of depository receipts(e.g. investment management institution) and their Custodians, to instruct,confirm and report on the issuance or conversion of depository receipts.

MT 587 Depositary receipt instruction - This message is sent by an owner ofa depositary receipt to its custodian. It is used to instruct the issuance orrelease of a depositary receipt from / to ordinary shares, or to instruct theconversion from one type of depositary receipt to another.

MT 588 Depositary receipt confirmation - This message is sent by acustodian to an owner of a depositary receipt. It is used to confirm theissuance or release of a depositary receipt from / to ordinary shares, or toconfirm the conversion from one type of depositary receipt to another, and toprovide details concerning cash movements associated with the processingof the depository receipt.

Account

ServicerAccount

Owner

Depositary receipt instruction



Copy to third party

Account

ServicerAccount

Owner

Depositary receipt confirmation


Re-send previously sent confirmation

Copy to third party

81

MT 589 Depositary receipt status and processing advice - This messagetype is sent by a custodian to the owner of a depositary receipt. It is used toadvise the status, or the change in status, of a depositary receipt transactionpreviously instructed by or executed on behalf of the Receiver.

1.7. Securities markets - custody services: securities lending& borrowing

Contrary to the previously described messages, the MT 516, MT 526, MT 581and MT 582 are based on the ISO 7775 standard.

These messages are typically sent between a client (e.g. investmentmanagement institution) and a financial institution (e.g. Custodian) to providelists of securities available for lending, request the borrowing of a particularsecurity, and confirm the details of a new securities loan.

MT 516 Securities loan confirmation - This message is sent from onefinancial institution to another, both of which are involved in the lending ofsecurities. It is used to confirm the details of a new securities loan, a partialrecall of securities previously out on loan, a partial return of securitiespreviously out on loan and the closeout of a securities loan.

Account

ServicerAccount

Owner

Depositary receipt status and processing advice

Reply to request to cancel previously sent instruction

Reply to request for status of transaction

Copy to third party

Re-send previously sent advice

Lender Borrower

Confirm details of new loan

Partial recall of securities on loan

Partial return of securities on loan

Close-out a securities loan

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MT 526 General securities lending / Borrowing message - This messagetype is sent from one financial institution to another, both of which areinvolved in the lending of securities. It is used to:- list specified securities available (or no longer available) for lending- request the borrowing of a specified security- notification of a partial or total return of the securities- request the potential lender to hold the specified securities until further notice- confirm that specified securities are being held- request a loan confirmation or cancel a request to hold securities until

further notice

MT 581 Collateral adjustment message - This message is sent from onefinancial institution to another, both of which are involved in a transaction forwhich collateral has been provided (e.g. a securities loan). It is used to claimor notify an increase or decrease to the collateral amount resulting from achange in the value of the existing collateral amount relative to the securitieson loan.

Lender Borrower

List securities available / not available for loan

Request the borrowing of a security

Notification of partial / total return of securities

Request / confirm a hold on securities to be lent

Request a confirmation of a loan

Cancel a request to hold securities

Lender Borrower

Claim / notify change to collateral amount

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MT 582 Reimbursement claim or advice - This message is sent by a financialinstitution to another financial institution, both of which are involved in asecurities transaction. It is used to claim reimbursement of funds paid by theSender on behalf of the Receiver and / or securities received by the Receiverand which are due to the Sender. The message may also be used to advisethe Receiver that funds and / or securities have been or will be remitted bythe Sender in favour of the Receiver.

1.8. Securities markets - custody services: collateralmanagement

These messages are typically sent between a collateral giver and a collateraltaker to provide details of collateral instructions, claims, substitutions ofspecific securities used as collateral and reporting statements.

MT 503 Collateral claim - This message is sent either by the collateral takerto the collateral giver, or vice versa by the collateral giver to the collateraltaker.

When sent by the taker, it is used to request new collateral at the initiation ofan exposure, and / or request additional collateral. When sent by the giver, itis used to request the return of collateral, and / or recall the collateral uponthe termination of an underlying exposure.

Lender Borrower

Claim reimbursement of funds / securities

Notification that funds / securities have / will be remitted

Collateral

takerCollateral

giver

Request new / additional collateral

Request return or recall collateral

Request cancellation of previously sent collateral claim


Re-send previously sent collateral claim

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MT 504 Collateral proposal - This message is sent by the collateral giver tothe collateral taker to propose new collateral at the initiation of an exposure,and / or propose additional collateral at variation of exposure.

MT 505 Collateral substitution - This message is sent by the collateral giverto the collateral taker to propose the substitution of collateral held. Thismessage is also sent by the collateral taker to the collateral giver to requestthe substitution of collateral held.

Collateral

takerCollateral

giver

Propose new / additional collateral

Request cancellation of previously sent proposal

Re-send previously sent proposal

Copy to third party

Collateral

takerCollateral

giver

Propose / request substitution of collateral

Request cancellation of previously sent substitution

Re-send previously sent substitution


85

MT 506 Collateral and exposure statement - This message is sent either bythe collateral giver to the collateral taker, or by the collateral taker to thecollateral giver. It is used to provide the details of the valuation of both thecollateral and the exposure.

MT 507 Collateral status and processing advice - This message is sent bythe Receiver of a collateral claim, a collateral proposal or a proposal / requestfor collateral substitution. It is used to advise the status of the receivedmessage.

It may also be used to:- reject or accept a claim, proposal, or the proposal / request of a collateral

substitution- advise the settlement details of proposed collateral

Collateral

takerCollateral

giver

Statement of collateral and exposure


Re-send previously sent statement


Collateral

takerCollateral

giver

Advise status of collateral claim

Reject / accept collateral claim, proposal or substitution

Advise settlement details of proposed collateral


Re-send previously sent status / advice

86

MT 527 Tri-party collateral instruction - This message is sent by a tradingparty to its tri-party agent as instruction to perform a specific action on acollateral management transaction.

MT 558 Tri-party collateral status and processing advice - This message is sent by a tri-party agent after the receipt of a collateral instruction from itsclient. In this message, the Sender is the tri-party agent and the Receiver is either the collateral taker or the collateral giver. This message providesvaluation results as well as the status of the collateral instruction and thestatus of the proposed collateral movements (cash and securities).

Collateral

taker or

giver

Tri -party

agent

Instruction to perform action on collateral transaction



Copy to third party

Collateral

taker or

giver

Tri -party

agent

Status of instruction and collateral movements


Re-send previously sent advice

Copy to third party

87

MT 569 Tri-party collateral and exposure statement - This message is sentby a tri-party agent to both the collateral giver and the collateral taker toprovide the details of the valuation of both the collateral and the exposure:- after all collateral movements have been affected to show the end (fixed)

positions or,- after settlement but taking into account future collateral management

instructions (forecasting the mark-to-market).

Collateral

taker or

giver

Tri -party

agent

Statement of fixed collateral positions

Statement of forecasted mark-to-market positions

Re-send previously sent statement

Copy to third party

88

2. SWIFTNet FIXThe SWIFTNet FIX service is accessed via the Secure IP Network (SIPN) andthe SWIFTNet messaging services and related products. The servicesupports secure and highly available communications using FIX versions 4.0,4.1, 4.2, 4.3 and 4.4 over SWIFTNet.

SWIFTNet FIX enables sell-side and buy-side firms connected to SWIFTNet tocommunicate their pre-trade and trade related information with their TradingPartners by means of a single, secure and reliable network connection, andwith the use of a single FIX Session. The service has been designed tosubstantially reduce the costs and the risks associated with managingmultiple physical connections and multiple FIX Sessions with separatecounterparties. SWIFT’s single window approach to service delivery alsoenables other SWIFTNet Services to be accessed by means of the samesingle connection to SWIFTNet.

Customers connecting to SWIFTNet for FIX will typically have their own ordermanagement system and FIX engine software to create FIX messages. Inorder to exchange messages over SWIFTNet, SWIFT supplies software calledFIXConnector, which works in conjunction with the standard SWIFTNetmessaging software – SWIFTNet Link (SNL) as illustrated below:

Order management system (OMS) / FIX engine with direct connection

SWIFTNet FIX allows users to exchange the full application (business)message set contained in the versions of the FIX protocol supported on theservice. FIX protocol includes multiple application messages, but the mainmessages used are those detailed below (some of which are only available in later versions of FIX).

FIX session 1

Buy side

FIXengine server

Sell side 1

FIX session 2

FIXengine server

Sell side 2

FIX session 3

OMS/FIXengine server

SWIFTNetFIX HUB

Fix connector

Fix connector

Fix Connector

Fix connector

SWIFTNet

89

Although primarily used for equities transactions, with the advent of FIX 4.4,fixed income trading and trading in other asset classes (e.g. FX, derivatives) is also now supported.

The flows shown in this section represent the main use of each message, andare just some of the messages available. For full details explaining the use ofeach message, please refer to documentation provided by FPL (FIX ProtocolLtd.).

Message name Page

Pre-trade 90

Indication of interest 90

Quote request 90

Quote 90

Trade 91

New order single or multi-leg 91

Execution report 91

Allocation 91

Allocation instruction 91

Allocation instruction acknowledgement 92

Allocation report 92

Allocation report acknowledgement 92

Confirmation 93

Confirmation 93

Confirmation acknowledgement 93

90

2.1. SWIFTNet FIX: pre-tradeIndication of interestUnsolicited list of offerings from the sell-side, sent from the executing party(e.g. broker / dealer) to the investment management institution (IMI).

Quote requestUnsolicited inquiry for bids wanted from the buy-side. Unsolicited; can alsobe used to identify an instrument based on attributes, learn a securityidentifier or to calculate size pre-trade. It is sent by the IMI to the executingparty.

QuoteThis is sent by the executing party back to the IMI in response to a QuoteRequest.

IMIExecuting

party

List of offerings from sell-side

Cancel previously sent list

Replace previously sent list

IMIExecuting

party

Inquiry for bids wanted from the buy-side

IMIExecuting

party

Quote from sell-side

91

2.2. SWIFTNet FIX: tradeNew order single or multi-legThis can be sent unsolicited by the IMI to the executing party, or in response to a quote or firm offering.

Execution reportThis is sent by the executing party to the IMI immediately in response to neworder and each time the state of the order changes.

2.3. SWIFTNet FIX: allocationAllocation instructionThis is sent by the IMI to the executing party, and follows up new order beforeor after the trade is filled. It is used to indicate how a trade is allocated intospecific accounts.

IMIExecuting

party

New order (single or multi-leg)

Cancel previously sent order

Replace previously sent order

IMIExecuting

party

Acknowledgement of new order

Notification of partial fills

Notification of filled order

Acknowledgement of cancelled order

IMIExecuting

party

Instruction to allocate previously sent order across accounts

Cancel previously sent instruction

Replace previously sent instruction

92

Allocation instruction acknowledgementThis is sent by the executing party to the IMI to acknowledge receipt of theallocation instruction, but not yet accepted, or can report errors in theallocation instruction message.

Allocation reportThis is sent by the executing party to the IMI to accept and confirm theallocation instruction, and conveys data for each sub-account (i.e. net money,accrued interest, etc.).

Allocation report acknowledgementThis is sent by the IMI to the executing party to confirm the allocation reportand its calculations or to reject the allocation report.

IMIExecuting

party

Acknowledge receipt of allocation instruction

Report errors in allocation instruction

IMIExecuting

party

Accept and confirm allocation instructions

Cancel previously sent report

Replace previously sent report

IMIExecuting

party

Confirm allocation report

Reject allocation report

93

2.4. SWIFTNet FIX: confirmationConfirmationThis is sent by the executing party to the IMI to confirm the booking of a tradeat the individual account level.

Confirmation acknowledgementThis is sent by the IMI to the executing party to affirm or reject theconfirmation message.

IMIExecuting

party

Confirm booking of trade at account level

Cancel previously sent confirm

Replace previously sent confirm

IMIExecuting

party

Affirm confirmation of allocation

Reject previously sent affirm

94

3. SWIFTNet FundsThe SWIFTNet Funds service enables users active in investment fundsdistribution to communicate with their counterparties using open, non-proprietary message standards in XML syntax that cover the bulk of theirflows. These new XML based standards are recognised by industry leadersand market associations as the de-facto investment funds industry marketstandards and are part of the new ISO 20022 standard.

SWIFT’s initial focus for the investment funds industry is in Europe and Asia /Pacific, where funds processing is largely manual with little, if any,standardisation. It also applies to cross-border flows with the US. SWIFTNetFunds allows for the creation of a common framework for the investmentfunds distribution industry to automate processing, in order to:- reduce operational costs and associated risks- seamlessly capture volume growth (thanks to minimised volume sensitivity)- improve client service (reduced error rates, improved timeliness of reporting,

improved cut-off times for end-investors, etc.)

This is a new service on SWIFTNet, which has resulted in the creation of newXML message standards. The majority of these messages are available in2004, with the remainder becoming available in 2005 and 2006.

95

Phase’s A & B – Q4 2004

Orders and Confirmations:

- Subscription - Bulk order

- Subscription - Bulk order confirmation

- Subscription - Bulk order cancellation instruction

- Subscription - Multiple order

- Subscription - Multiple order confirmation

- Subscription - Multiple order cancellation instruction

- Redemption - Bulk order

- Redemption - Bulk order confirmation

- Redemption - Bulk order cancellation instruction

- Redemption - Multiple order

- Redemption - Multiple confirmation

- Redemption - Multiple cancellation instruction

- Switch order

- Switch order confirmation

- Switch cancellation instruction

- Order instruction status report

- Order cancellation status report

- Request for status report

- Rejection of request for status report

Reporting & custody:

- Price report

- Price report correction

- Price report cancellation

- Estimated cash flow report

- Confirmed cash flow report

- Detailed estimated cash flow report

- Detailed confirmed cash flow report

96

Phase C – Q2 2005

Transfers

- Transfer IN instruction

- Transfer IN confirmation

- Transfer IN cancellation Instruction

- Transfer OUT instruction

- Transfer OUT confirmation

- Transfer OUT cancellation instruction

- Status on transfers

Reporting & custody:

- Statement of holdings

- Statement of executed transactions

Phase D – 2005 / 2006

Account management:

- Account opening

- Account modification

- Account confirmation

Reporting:

- Commissions reporting (trailer and transaction )

- Request for statements / Statuses

- Statement of pending transactions

- Static data reporting

97

Message Name PageOrders / switches & confirmations 98Subscription – Bulk order 98Subscription – Bulk order confirmation 98Subscription – Bulk order cancellation 99Subscription – Multiple order 99Subscription – Multiple confirmation 100Subscription – Multiple cancellation 100Redemption – Bulk order 101Redemption – Bulk order confirmation 101Redemption – Bulk order cancellation 102Redemption – Multiple order 102Redemption – Multiple confirmation 103Redemption – Multiple cancellation 103Switch – order 104Switch – confirmation 104Switch – cancellation 105Order instruction status report 105Order cancellation status report 106Request for status report 106Rejection of request for status report 107Reporting & custody: NAV / price reporting 107Price report 107Price report correction 108Price report cancellation 108Reporting & custody: cash flow reporting 109Estimated cash flow report 109Confirmed cash flow report 109Detailed estimated cash flow report 110Detailed confirmed cash flow report 110Transfers 111TBA – Phase C 111Reporting & custody: account reporting 111TBA – Phase C 111Account management 111TBA – Phase D 111Reporting & custody: commissions reporting 111TBA – Phase D 111Reporting & custody: static data reporting 111TBA – Phase D 111Reporting & custody: account reporting 112TBA – Phase D 112Reporting & custody: corporate actions 112TBA – Phase D 112

98

The flows shown in this section represent the main use of each message. Full details explaining the use of each message can be found in theSWIFTNet Funds service description.

3.1. SWIFTNet Funds – orders / switches & confirmationsThese messages are in Phase A of the modelling process, and are available from Q4 2004.

Subscription - Bulk order A bulk message is typically a message containing a series of individual ordersfrom different accounts, for the same financial instrument with the sameintermediary details. The order will usually result in a single cash settlementexecuted via a single payment method. The order is used to subscribe to agiven amount / quantity of a specified financial instrument. It is sent by aconcentrator, or a party collecting orders and bulking them, to the transferagent or another intermediary.

Subscription - Bulk order confirmation This message is sent by a transfer agent to an account owner or itsauthorised representative. It is used to confirm the details of the execution ofa subscription bulk order instruction.

Account

servicerAccount

owner

Subscription – bulk order

Re-send previously sent subscription

Copy to third party

Account

servicerAccount

owner

Subscription – bulk order confirmation


Copy to third party

Subscription - Bulk order cancellation This message is sent by an account owner or its designated agent to anaccount servicer. It is sent to cancel a subscription bulk order instruction.

Subscription – Multiple order A ‘multiple’ message is typically a message containing a list of orders (severalISINs) for the same account (different from bulk). Financial advisers or banksthat are managing a portfolio for a particular account may send it.

This message is sent by an account owner or its authorised representative toa transfer agent, or by an intermediary to another intermediary or transferagent. It is used to instruct the transfer agent to subscribe to a given amount/ quantity of a specified financial instrument. This message may be used for asingle financial instrument or multiple financial instruments.

99

Account

servicerAccount

owner

Subscription – bulk order cancellation

Re-send previously sent cancellation

Copy to third party

Account

servicerAccount

owner

Subscription – multiple order

Re-send previously sent subscription

Copy to third party

100

Subscription - Multiple confirmation This message is sent by a transfer agent to an account owner or itsauthorised representative. It is used to confirm the details of the execution ofa subscription (single or multiple order) instruction. A multiple order can beanswered by more than one confirmation as the valuation cycle of theproducts indicated in the orders may be different.

Subscription - Multiple cancellation This message is sent by an account owner or its designated agent to anaccount servicer. It is sent to cancel a single order subscription instruction.

Account

servicerAccount

owner

Subscription – multiple order confirmation


Copy to third party

Account

servicerAccount

owner

Subscription – multiple order cancellation


Copy to third party

101

Redemption – Bulk order A bulk message is typically a message containing a series of individual ordersfrom different accounts, for the same financial instrument with the sameintermediary details. The order will usually result in a single cash settlementexecuted via a single method. This order is used to redeem a given amount /quantity / % of the portfolio of a specified financial instrument. It is usuallysent by a concentrator, or a party collecting orders and bulking them, to thetransfer agent or another intermediary.

Redemption - Bulk order confirmation This message is sent by a transfer agent to an account owner or itsauthorized representative. It is used to confirm the details of the execution ofa redemption bulk order instruction.

Account

servicerAccount

owner

Redemption – bulk order

Re-send previously sent redemption

Copy to third party

Account

servicerAccount

owner

Redemption – bulk order confirmation


Copy to third party

102

Redemption - Bulk order cancellation This message is sent by an account owner or its designated agent to anaccount servicer. It is sent to cancel a bulk order redemption instruction.

Redemption - Multiple order A ‘multiple’ message is typically a message containing a list of orders (severalISINs) for the same account (different from bulk). Financial advisers or banksthat are managing a portfolio for a particular account may send it.

This message is sent by an account owner or its authorized representative toa transfer agent, or by an intermediary to another intermediary or transferagent. It is used to instruct the transfer agent to redeem a given amount /quantity / % of the portfolio of a specified financial instrument. This messagemay be used for a single financial instrument or multiple financial instruments.

Account

servicerAccount

owner

Redemption – bulk order cancellation


Copy to third party

Account

servicerAccount

owner

Redemption – multiple order

Re-send previously sent redemption

Copy to third party

103

Redemption - Multiple confirmation This message is sent by a transfer agent to an account owner or itsauthorised representative. It is used to confirm the details of the execution ofa redemption (single or multiple order) instruction. A multiple order can beanswered by more than one confirmation as the valuation cycle of theproducts indicated in the orders may be different.

Redemption - Multiple cancellation This message is sent by an account owner or its designated agent to anaccount servicer. It is sent to cancel a single order subscription instruction.

Account

servicerAccount

owner

Redemption – multiple order confirmation


Copy to third party

Account

servicerAccount

owner

Redemption – multiple order cancellation


Copy to third party

104

Switch - Order This message is sent by an account owner or its authorized representative toa transfer agent, or by an intermediary to another intermediary or transferagent. This message is used to instruct a switch from a given amount /quantity / % of the portfolio of a specified financial instrument to a givenamount / quantity of a specified financial instrument.

Switch - Order confirmation This message is sent by a transfer agent to an account owner or itsauthorized representative, to confirm the details of the execution of a switchinstruction.

Account

servicerAccount

owner

Switch order

Re-send previously sent switch

Copy to third party

Account

servicer

Account

owner

Switch order confirmation


Copy to third party

105

Switch - Cancellation This message is sent by an account owner or its designated agent to anaccount servicer, to cancel a switch order instruction.

Order instruction status reportThis message is sent by an executing party (intermediary or transfer agent). Itinforms the instructing party of the status of its order message, either itsprevious subscription or redemption multiple order, subscription orredemption bulk order or switch order. The status message can be used toindicate that an order is received and good for execution, suspended (plus thereason), or in repair (plus the reason).

Account

servicerAccount

owner

Switch order cancellation


Copy to third party

Account

servicerAccount

owner

Status on order instruction

Update on previously sent status on order

Copy to third party

106

Order cancellation status reportThis message is sent by an executing party to an instructing party. It informsthe instructing party of the status of its order cancellation instructionmessage.

Request for status reportThis message is sent by an instructing party to an executing party. It is usedto request the status of an order message or an order cancellation instructionmessage.

Account

servicerAccount

owner

Status on order cancellation

Update on previously sent status on order cancellation

Copy to third party

Account

servicerAccount

owner

Request for status of order or order cancellation

Re-send previously sent request

Copy to third party

107

Rejection of request for status reportThis message is sent by the executing party to the instructing party. It is usedto reject the request for status message.

3.2. SWIFTNet Funds - reporting & custody: NAV / pricereporting

These messages are in Phase A of the modelling process, and are availablefrom Q4 2004.

Price reportThis message is sent by the fund accountant calculating the net asset valueand other applicable investment fund prices, to the transfer agent and allother relevant parties (e.g. fund management company, market dataproviders, newspapers, etc.). This message can also be sent to a specifiedlist of distributors / concentrators. It is used to provide price and net assetvalue information for a fund (or several funds) for a given date and optionally,to quote price variation information.

Account

servicerAccount

owner

Reject request for status on order or order cancellation

Update on previously sent rejection

Copy to third party

Fund

accountantTransfer

agent

Price and net asset value information

Price variation information

Copy to third party

108

Price report correctionThis message is sent by the fund accountant to the transfer agent or a marketdata provider or any other interested party. It is used to correct at least oneof the prices for a financial instrument that was quoted in a previously sentprice report message. The price information included in the previously sentprice report message must be resent in the price report correction, with therelevant the new value.

Price report cancellationThis message is sent by the fund accountant to the transfer agent or a marketdata provider or any other interested party. It is used to cancel a previouslysent price report message.

Fund

accountantTransfer

agent

Correct price (s) from previously sent price report

Copy to third party

Fund

accountantTransfer

agent

Cancellation of previously sent price report

Copy to third party

109

3.3. SWIFTNet Funds - reporting & custody: cash flowreporting

These messages are in Phase A of the modelling process, and are availablefrom Q4 2004.

Estimated cash flow reportThis message is sent by the transfer agent, or a designated agent of the fund, to an investment manager or any other interested party. It is used to providean estimate of the incoming and outgoing cash per investment fund. Themessage reports the cash flow per financial instrument. The incoming andoutgoing cash result from redemptions, subscriptions and switchtransactions, including in-specie transactions. In this message, the price/s of the previous trade date is / are used for the forecast.

Confirmed cash flow reportThis message is sent by the transfer agent, or a designated agent of the fund, to an investment manager, fund accountant or any other interested party. It isused to provide a confirmed report of the incoming and outgoing cash perinvestment fund. The message reports the cash flow per financial instrument.The incoming and outgoing cash results from redemptions, subscriptions andswitch transactions, including in-specie transactions. In this message, theprice/s of the applicable trade date(s) is / are used for the report (maindifference with the fund estimated cash flow report, which uses the previoustrade date).

IMITransfer

agent

Detailed confirmed report of incoming / outgoing cash

Copy to third party

IMITransfer

agent

Confirmed report of incoming / outgoing cash

Copy to third party

110

Detailed estimated cash flow reportThis message is sent by the transfer agent, or a designated agent of the fund, to an investment manager or any other interested party. It is used to provide anestimate of the incoming and outgoing cash flows per investment fund. Theadditional data provided in this message (compared to the Fund EstimatedCash Flow Report) includes the following sorting criteria: country, currency,institution, or user defined criteria. The message reports the cash flow perfinancial instrument.

Detailed confirmed cash flow reportThis message is sent by the transfer agent, or a designated agent of the fund,to an investment manager or any other interested party. It is used to providea confirmed report of the incoming and outgoing cash flows per investmentfund. The additional data provided in this message (compared to the FundConfirmed Cash Flow Report) includes the following sorting criteria: country,currency, institution, or user defined criteria. The message reports the cashflow per financial instrument.

IMITransfer

agent

Detailed estimate of incoming / outgoing cash report

Copy to third party

IMITransfer

agent

Detailed confirmed report of incoming / outgoing cash

Copy to third party

111

3.4. SWIFTNet Funds - transfersThe functions involving changes in the fund register due to a change of recordkeeper (with or without changing the beneficial owner).

These messages are in Phase C of the modelling process, and are availablefrom Q2 2005.

3.5. SWIFTNet Funds - reporting & custody: accountreporting

The functions involved in providing statements of executed transactions andholdings across an account.

These messages are in Phase C of the modelling process, and are availablefrom Q2 2005.

3.6. SWIFTNet Funds - account managementThe functions involved in instructing a new account to be opened, and anysubsequent modification of an accounts details.

These messages are in Phase D of the modelling process, and will beavailable in late 2005 / early 2006.

3.7. SWIFTNet Funds - reporting & custody: commissionsreporting

The functions involved in providing details of commissions (trailer ortransaction related) to fund distributors.


3.8. SWIFTNet Funds - reporting & custody: static datareporting

The functions involved in sending out notifications of key features andmodifications of an investment fund prospectus.


112

3.9. SWIFTNet Funds - reporting & custody: accountreporting

The functions involved in providing statements of pending transactions andrequests for statements / statuses.


3.10. SWIFTNet Funds - reporting & custody: corporateactions

For corporate actions and entitlement events surrounding investment funds, theMT 56x ISO 15022 corporate action messages on FIN can be used (refer to ISO15022 messages in Section 1.5). Corporate action messages specifically forinvestment funds have not been designed in the new XML syntax.

114

4. Payments & cash managementThis section contains details of the available Customer Payments (Category 1),Financial Institution Transfers (Category 2), and Cash Management &Customer Status (Category 9) messages.



Customer payments 115

101 Request for transfer 115

103 Single customer credit transfer 116

Financial institution transfers 116

200 Financial institution transfer for its own account 116

201 Multiple financial institution transfer for its own account 117

202 General financial institution transfer 117

203 Multiple general financial institution transfer 118

205 Financial institution transfer execution 118

210 Notice to receive 119

Cash management & customer status 119

900 Confirmation of debit 119

910 Confirmation of credit 120

920 Request message 120

935 Rate change advice 121

940 Customer statement message 121

941 Balance report 122

942 Interim transaction report 122

950 Statement message 123

115

4.1. Customer paymentsCustomer payments are made using the Category 1 messages. These dealwith payments, or information about payments, in which the ordering party orthe beneficiary, or both, are not financial institutions.

MT 101 Request for transfer - This message is sent by a financial institutionon behalf of a non-financial institution account owner (e.g. the orderingcustomer), to the account servicing financial institution.

It is used to move funds from the ordering customer's account(s) serviced atthe account servicing institution, or from an account(s) owned by the orderingcustomer whom the instructing customer has explicit authority to debit (e.g. asubsidiary account).

The MT 101 can be used to order the movement of funds between orderingcustomer accounts, or in favour of a third party, either domestically orinternationally.

Account

servicer

Financial

institution

(on behalf of

account

owner)

Request for transfer

116

MT 103 Single customer credit transfer - This message type is sent by or onbehalf of the financial institution of the ordering customer, directly or through acorrespondent(s), to the financial institution of the beneficiary customer.

It is used to convey a funds transfer instruction in which the orderingcustomer, the beneficiary customer, or both, are non-financial institutions fromthe perspective of the Sender.

4.2. Financial institution transfersFinancial institution transfers are made using the Category 2 messages.These deal with payments, or information about payments, in which all partiesin the transaction are financial institutions. The flows shown in this sectionrepresent the main use of each message. Full details explaining the use ofeach message can be found in the SWIFT User Handbook.

MT 200 Financial institution transfer for its own account - This message issent by an account owner to one of its account servicing institutions. It isused to request the movement of funds from an account that the Receiverservices for the Sender to an account that the Sender has, in the samecurrency, with another financial institution.

Financial

institution BFinancial

institution A

Single customer credit transfer

Account

servicerAccount

owner

Request movement of funds

117

MT 201 Multiple financial institution transfer for its own account - Thismultiple message is sent by an account owner to one of its account servicinginstitutions. It is used to request the movement of funds from an account thatthe Receiver services for the Sender to several accounts that the Sender has,in the same currency, with other financial institutions.

MT 202 General financial institution transfer - This message is sent by or onbehalf of the ordering institution directly, or through correspondent(s), to thefinancial institution of the beneficiary institution. It is used to order themovement of funds to the beneficiary institution. This message may also besent to a financial institution servicing multiple accounts for the Sender totransfer funds between these accounts. In addition it can be sent to afinancial institution to debit an account of the Sender, serviced by theReceiver, and to credit an account, owned by the Sender at a specifiedinstitution.

Account

servicerAccount

owner

Request movement of funds

Account

servicerAccount

owner

Order the movement of funds

118

MT 203 Multiple general financial institution transfer - This multiple messageis sent by or on behalf of the ordering institution directly, or throughcorrespondent(s), to the financial institution(s) of several beneficiaryinstitutions. The message contains several transactions. It is used to orderthe movement of funds to each beneficiary institution.

This message may also contain order(s) for the movement of the Sender'sown funds in favour of itself. This is the case when the Receiver servicesmultiple accounts for the Sender and the funds are to be transferred betweenthese accounts. In addition, it can also be sent to a financial institution todebit an account of the Sender serviced by the Receiver and to credit anaccount owned by the Sender at a specified institution.

MT 205 Financial institution transfer execution - This message is sent by theReceiver of a category 2 transfer message (e.g. MT 200, 201, 202, 203 or205), directly or through correspondent(s), to another financial institutionlocated in the same country as the Sender. It is used to further transmit afunds transfer instruction domestically.

Account

servicerAccount

owner

Order the movement of funds

Account

servicer

Domestic

financial

institution

Instruction to execute transfer

119

MT 210 Notice to receive - This message type is sent by an account ownerto one of its account servicing institutions. It is an advance notice to theaccount servicing institution that it will receive funds to be credited to theSender's account.

4.3. Cash management and customer statusCash management and customer status details are exchanged using theCategory 9 messages. These messages are exchanged between financialinstitutions, either on behalf of themselves, other financial institutions, orcustomers. The flows shown in this section represent the main use of eachmessage. Full details explaining the use of each message can be found inthe SWIFT User Handbook.

MT 900 Confirmation of debit - This message is sent by an account servicinginstitution to an account owner. It is used to notify the account owner of anentry which has been debited from its account. The entry will be furtherconfirmed by statement.

Account

servicerAccount

owner

Advance notice to receive funds

Account

servicerAccount

owner

Notification of debit to account

120

MT 910 Confirmation of credit - This message is sent by an accountservicing institution to an account owner. It is used to notify the accountowner of an entry which has been credited to its account. The entry will befurther confirmed by statement.

MT 920 Request message - This multiple message is sent by an accountowner, or financial institution (concentrating institution) acting on behalf of anaccount owner, to an account servicing institution. It is used to request theaccount servicing institution to transmit one or more MT 940 CustomerStatement(s), MT 941 Balance Report(s), MT 942 Interim TransactionReport(s), or MT 950 Statement Message(s), containing the latest informationavailable for the account(s) identified in the message.

Account

servicerAccount

owner

Notification of credit to account

Account

servicerAccount

owner

Request for MT 940 - 942, 950

121

MT 935 Rate change advice - This multiple message is used by the Senderto advise interest rate change(s) to the Receiver. Interest rate change(s) thatcan be advised by this message type include: Notice, Call, Prime,Commercial, Base, Current and Deposit.

MT 940 Customer statement message - This message is sent by an accountservicing institution to a financial institution which has been authorised by theaccount owner to receive it. It is used to transmit detailed information aboutall entries booked to the account, and is commonly used for automatedreconciliations.

Account

servicerAccount

owner

Advice of interest rate change(s)

Account

servicer

Financial

institution

(behalf of

account

owner)

Statement of detailed entries booked to account

122

MT 941 Balance report - This message is sent by an account servicinginstitution to a financial institution which has been authorised by the accountowner to receive it. It is used to transmit balance information, reflecting thesituation as at an identified time.

MT 942 Interim transaction report - This message is sent by an accountservicing institution to a financial institution which has been authorised by theaccount owner to receive it. It is used to transmit detailed and / or summaryinformation about entries debited or credited to the account since the laststatement or balance report, or the last interim transaction report.

Account

servicer

Financial

institution

(behalf of

account

owner)

Report of balance information on account

Account

servicer

Financial

institution

(behalf of

account

owner)

Report of transaction information on account

123

MT 950 Statement message - This message is sent by an account servicinginstitution to an account owner. It is used to transmit detailed informationabout all entries booked to an account, and is commonly used for automatedreconciliations.

Account

ServicerAccount

Owner

Statement of detailed entries booked to account

124

5. Treasury markets: FX, moneymarkets, FX options & derivatives

SWIFT offers a range of standards that cover different treasury marketsegments:- Foreign exchange (FX)- Money markets- OTC derivatives

Many of the treasury messages are specifically aimed at investmentmanagement institutions, allowing them to instruct and confirm FX and moneymarket deals with broker / dealers and custodians.


125


Foreign exchange 126

300 Foreign exchange confirmation 126

303 Forex / Currency option allocation instruction 126

304 Advice / Instruction of a third party deal 127

307 Advice / Instruction of a third party FX deal 127

308 Instruction for gross / Net settlement of third party FX deals 127

380 Foreign exchange order 128

381 Foreign exchange order confirmation 128

Money markets 129

320 Fixed loan / Deposit confirmation 129

321 Instruction to settle a third party loan / Deposit 129

330 Call / Notice loan / Deposit confirmation 130

350 Advice of loan / Deposit interest payment 130

OTC derivatives 131

303 Forex / Currency option allocation instruction 131

305 Foreign currency option confirmation 131

306 Foreign currency option confirmation 132

340 Forward rate agreement confirmation 132

341 Forward rate agreement settlement confirmation 133

360 Single currency interest rate derivative confirmation 133

361 Cross currency interest rate derivative confirmation 134

362 Interest rate swap reset / Advice of payment 134

364 Single currency interest rate derivative termination / Recouponing confirmation 135

365 Cross currency interest rate swap termination / Recouponing confirmation 135

126

5.1. Foreign exchange (FX)MT 300 Foreign exchange confirmation - This message is exchanged by oron behalf of the institutions who have agreed to a foreign exchange contract.This message may also be sent by a money broker to the two parties forwhich the broker arranged the deal. The message is also used whenconfirming deals settling through CLS.

The MT 300 is used to:- confirm the details of a new contract between the parties- confirm an exercised foreign currency option- confirm the details of an amendment to a previously sent confirmation- cancel a previously sent confirmation.

MT 303 Forex / Currency option allocation instruction - This message issent by an instructing party, such as an investment management institution(IMI), to an executing broker to instruct the allocation of either a block foreignexchange trade or a block currency option. It contains both the terms of theblock trade and the individual allocations.

Instructing

party (or

CLS)

Executing

party (or

CLS)

Confirm details of a new contract

Confirm an exercised foreign currency option

Confirm an amendment to a previously sent confirmation

Cancel a previously sent confirmation

Instructing

partyExecuting

party

Instruct the allocation of a deal

Cancel / amend block trade and set of allocations

Amend a number of individual allocations

127

MT 304 Advice / Instruction of a third party deal - This message is sent byan IMI to a custodian bank (or CLS) as an advice of / instruction to settle athird party foreign exchange deal. It is also used for deals settling throughCLS.

MT 307 Advice / Instruction of a third party FX deal - This message is sentby an IMI to a custodian bank as an advice of / instruction to settle a thirdparty foreign exchange deal. It is a newer, ISO 15022 version, of the MT 304message.

MT 308 Instruction for gross / Net settlement of third party FX deals - Thismessage is sent by an IMI to a custodian (or CLS) just before value date, toinform which deals done on behalf of a third party are to be settled gross andwhich ones netted. The definition of third party must be agreed up frontbetween the IMI and the custodian relative to deals executed by thecustodian’s treasury area on behalf of the IMI.

IMI Custodian

(or CLS)

Advice / instruction to settle third party FX deal

Amend a previously sent advice / instruction

Cancel a previously sent advice / instruction

IMI Custodian

Advice of details of a new deal

Instruction to settle a deal


IMI Custodian

(or CLS)

instruction for gross / net settlement of 3rd party FX deal

Amend a previously sent advice / instruction


128

MT 380 Foreign exchange order - This message type is sent by an IMI to acustodian bank as an order to purchase or sell a specific amount of a certaincurrency.

MT 381 Foreign exchange order confirmation - This message type is sent bya custodian bank to an IMI to confirm the execution of an MT 380 previouslysent by the fund manager.

IMI Custodian

Order to buy / sell specific amount of foreign currency

Copy an order sent by other means (e.g. fax)

Copy to third party

IMI Custodian

Copy to third party

Confirm execution of foreign exchange order


Copy a confirmation sent by other means (e.g. fax)

129

5.2. Money marketsMT 320 Fixed loan / Deposit confirmation - This message is exchanged toconfirm a fixed term loan / deposit contract. This message is exchanged byor on behalf of the institutions who have agreed to a fixed term loan / depositcontract. A money broker may also send this message to the two parties forwhich he arranged the deal.

MT 321 Instruction to settle a third party loan / Deposit - This message issent by an IMI to the fund's custodian to advise the trade details and instructthe settlement of a fixed term loan / deposit done with a third party financialinstitution.

Instructing

partyExecuting

party

Confirm / notify details of a contract

Amend a previously agreed contract


Confirm / notify a rolled over / renewed contract

Confirm / notify the maturity of a contract

IMI Custodian

Notify / instruct to settle a new contract

Notify of a rollover / renovation of a contract

Notify the maturity of a contract

Cancel a previously sent instruction

130

MT 330 Call / Notice loan / Deposit confirmation - This message isexchanged to confirm a call / notice loan / deposit contract. It is sent by or onbehalf of the institutions that have agreed to a call / notice loan / depositcontract.

MT 350 Advice of loan / Deposit interest payment - It is used to inform thatan interest amount has been paid to the account of the beneficiary with thereceiving agent mentioned in the message. It is sent by or on behalf of theinstitution who has borrowed cash from another institution.

Instructing

partyExecuting

party


Amend / cancel a previously agreed contract

Increase / decrease in account balance of a contract

Notify changes in interest rate / period of notice

Notify the closing of a contract (final redemption)

Account

servicerAccount

owner

Notification of interest payment

Amend a previously sent advice

Cancel a previously sent advice

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5.3 OTC derivativesMT 303 Forex / Currency option allocation instruction - This message issent by an instructing party to an executing broker to instruct the allocation ofeither a block foreign exchange trade or a block currency option. The MT 303contains both the terms of the block trade and the individual allocations.

MT 305 Foreign currency option confirmation - This message is exchangedbetween the financial institutions that have agreed to a foreign currencyoption contract. It is used to confirm the details of a new contract, anamendment to a previously agreed contract, the cancellation of aconfirmation, or the surrender of an option by the buyer (holder) to the seller(grantor) for compensation.

Instructing

partyExecuting

party

Instruct the allocation of a deal

Cancel / amend block trade and set of allocations

Amend a number of individual allocations

Instructing

partyExecuting

party

Confirm details of a new contract

Surrender of an option for compensation

Confirm an amendment to a previously sent confirmation


132

MT 306 Foreign currency option confirmation - This message is exchangedby or on behalf of the institutions who have agreed to a foreign currencyoption contract. A money broker may also send this message to the twoparties for which he arranged the deal. The confirmed transaction is coveredby an ICOM, ISDA, Deutsche Rahmenvertrag, IFEMA, FEOMA or AFB MasterAgreement. These agreements are either signed or under negotiation. Themessage also caters for deals not covered by the above agreements.

The message is used to confirm / notify details of a new contract, anamendment to a previously agreed contract, the cancellation of aconfirmation, a trigger event (e.g. knock-in / knock-out of an option, hitting ofa trigger level) or the close out of an option.

MT 340 Forward rate agreement confirmation - This message is exchangedby or on behalf of the institutions or corporates, who have agreed to aforward rate agreement (FRA).

The confirmed transaction is covered by an ISDA, Deutscher Rahmenvertragfür Finanztermingeschäfte, FRABBA or AFB Master Agreement. Theseagreements are either signed or under negotiation. A money broker may alsosend this message to the two parties for which he arranged the deal.

The message is used to confirm / notify details of a new contract, anamendment to a previously agreed contract or the cancellation of aconfirmation.

Instructing

partyExecuting

party




Trigger event: knock-in, knock-out, hitting trigger level

Close out an option

Instructing

partyExecuting

party

Confirm / notify details of a new contract



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MT 341 Forward rate agreement settlement confirmation - This message isexchanged by or on behalf of the institutions that have agreed to a forwardrate agreement (FRA). It is used to confirm the settlement details of theforward rate agreement when the settlement rate has been fixed on the fixingdate.

MT 360 Single currency interest rate derivative confirmation - This messageis exchanged by or on behalf of the institutions that have agreed to a singlecurrency interest rate swap, a cap, a collar or a floor. The confirmedtransaction is covered by a BBAIRS, ISDA, Deutscher Rahmenvertrag fürFinanztermingeschäfte or AFB Master Agreement.

The message also covers deals which are not part of the above agreements, in which case, the two parties must have another bilateral agreement in place. It may also be sent by a money broker to the two parties for which the brokerarranged the deal. It is used to confirm the details of a new transactionbetween the parties.

Instructing

partyExecuting

party

Confirm settlement details of a new contract

Amend a previously agreed settlement message

Cancel a previously sent settlement message

Instructing

partyExecuting

party

Confirm details of a new transaction

Amend a previously sent confirmation


134

MT 361 Cross currency interest rate swap confirmation - This message isexchanged by or on behalf of the institutions who have agreed to a crosscurrency interest rate swap covered by a BBAIRS, Deutscher Rahmenvertragfür Finanztermingeschäfte or an ISDA Master Agreement.

The message also covers deals which are not part of the above agreements,in which case, the two parties must have another bilateral agreement in place,except under AFB Master (until the AFB defines the interbank confirmation forcross currency swaps, the MT 361 cannot be used to confirm suchtransactions).

This message may also be sent by a money broker to the two parties forwhich the broker arranged the deal. The message is used to confirm thedetails of a new transaction between the parties.

MT 362 Interest rate reset / Advice of payment - This message is exchangedby or on behalf of the financial institutions who have agreed to a single orcross currency interest rate derivative transaction, including caps, collars andfloors.

This message may be used to advise the details of the determination of thefloating interest rate(s), or advise the details of the payment of interest at theend of an interest period

Instructing

partyExecuting

party

Confirm details of a new transaction

Amend a previously sent confirmation


Instructing

partyExecuting

party

Advise details of the determination of floating rate interest

Advise details of payment of interest at end of interest period

Cancel / amend a previously sent reset / advice

135

MT 364 Single currency interest rate derivative termination / Recouponingconfirmation - This message is exchanged by or on behalf of the institutionswho have agreed to the termination, partial termination or recouponing of asingle currency interest rate swap, a cap, a collar or a floor. The terminated /recouponed transaction is covered by a BBAIRS, ISDA or AFB or anotherbilateral agreement.

This message may be used to confirm the details of the partial or fulltermination of an existing transaction, or confirm the details of therecouponing of an existing transaction.

MT 365 Cross currency interest rate swap termination / Recouponingconfirmation - This message is exchanged by or on behalf of the institutionswho have agreed to the termination, partial termination or recouponing of across currency interest rate swap.

The terminated / recouponed transaction is covered by a BBAIRS, ISDA oranother bilateral agreement. The message may be used to confirm the detailsof the partial or full termination of an existing transaction, or the details of therecouponing of an existing transaction.

Instructing

partyExecuting

party

Confirm details of partial / full termination of transaction

Confirm details of recouponing of transaction

Cancel / amend a previously sent termination / recouponing

Instructing

partyExecuting

party

Confirm details of partial / full termination of transaction

Confirm details of recouponing of transaction

Cancel / amend a previously sent termination / recouponing

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6. CLS third party serviceCLS Third party serviceFor CLS to achieve a significant reduction in settlement exposure, they requirea critical mass of settlement value. Therefore, CLS members need to settletrades not only between themselves, but also with non-CLS members (e.g.third parties).

CLS members can offer services to third parties whereby they input and settlecross-currency trades on behalf of their third party customer with the CLSBank. Likewise, third parties will need to communicate their cross-currencytrades to their CLS settlement members.

SWIFT provides a comprehensive solution to support this communicationflow, using its existing messaging network.

Who is eligible as a third party?- Financial institutions who are not CLS members- Any other SWIFT-eligible institution involved in cross-currency trading

SWIFT’s standard serviceSWIFT delivers copies of cross-currency confirmations (such as the MT 300message) sent between third parties and their counterparties, to the thirdparties’ chosen CLS Member.

SWIFT’s enhanced serviceSWIFT provides the matching status to CLS members of their third parties’MT 300 confirmation messages. By subscribing to Accord, third parties arealso able to view the matching status of their confirmations to be settled bythe CLS Bank.

Operational informationCLS members need to communicate with their third parties to provideoperation information (status of the trade within the CLS Bank) and cashreporting (pre-funding and associated reporting) of trades.

SWIFT provides messaging services for this operational information, includingthe MT9xx Cash Management messages, and the SWIFTNet Cash Reportingservice.

137

CLS Third party service flows

Third party Counterparty

CLS member

SWIFTNet services

Cash reporting

(using SWIFTNet

and XML standards)

(MT 300)

(MT 300)

Operational

information (using FIN

and FIN standards)

MT 970

MT 971

MT 900

MT 901

MT 950

MT 396

MT 398

Transaction input Notifications

CLS bank

SWIFT third party

serviceCopy of

MT 300

M Matching result

Enhanced service

M

138

7. SWIFTNet Accord

7.1. MatchingSWIFTNet Accord is a fail-safe matching and exception handling solution forforeign exchange, money market and derivatives confirmations. It provides real-time matching of confirmations, along with real-time exception handling,between two counterparties (even if only one of the counterparties is aSWIFTNet Accord subscriber).

SWIFTNet Accord is unique in that it allows you to have a single window forall your treasury and derivative deals, independent of:- Settlement method: bilaterally-netted, gross, CLS or SwapClear- Financial instrument: SWIFTNet Accord matches confirmations for foreign

exchange, money market and derivative deals- Counterparty: SWIFTNet Accord does not require your counterparties to be

SWIFTNet Accord subscribers as well; it can handle all your confirmationssent and received over the SWIFT network. SWIFTNet Accord can alsoprocess messages that were not exchanged via the SWIFT network, such asaffirmations of brokers.

How does it work?When a foreign exchange, money market or derivatives deal has been agreed,both parties confirm this deal by sending the appropriate SWIFT confirmationmessage. If either or both parties are SWIFTNet Accord subscribers, SWIFTcopies these messages to the central SWIFTNet Accord matching service.SWIFTNet Accord matches all confirmations in real-time. As confirmations,corrections and cancellations are received, SWIFTNet Accord automaticallyupdates the matching status in real-time.

SWIFTNet Accordsubscribers

SWIFTNet Accordsubscriber or

non- subscriber

Real-time, interactive reporting & exception

handling

SWIFT

Deal

Confirmations:(MT300,305,320, 330,340,

341, 360,361,362, 392)

AccordSWIFTNet AccordConfirmation matching

and bilateral netting

Copies of MT 3xx confirmations

139

Reduce riskReduction in operational risk is a key factor in the organisation of a foreignexchange, money market or derivatives back office. Increased regulatoryscrutiny has also suggested not only that operational risk be measured, andkept to a minimum, but also that specific amounts of regulatory capital be putaside to mitigate it.

SWIFTNet Accord subscribers significantly reduce operational risk throughtheir reliance on a central matching system. SWIFTNet Accord safeguards allconfirmations, and maintains a historical trace of all matching results. Whenboth parties to a deal are subscribers to SWIFTNet Accord, there is 100%certainty that the matching results will be identical for both parties.

Reduce costBy subscribing to SWIFTNet Accord rather than using a local matchingsystem, investment management institutions can save on the resourcesnormally required to keep a local matching system operational, maintainmessage standard changes, and provide the support it would requireinternally. A central matching solution also means that your usage of it isscalable between a few hundred confirmations per month and severalthousand per day.

7.2. NettingThe SWIFTNet Accord bilateral advisory netting service allows investmentmanagement institutions to net foreign exchange deals (MT300 messages).By not being restricted to any currency, or currency pair, SWIFTNet Accordenables users to reduce foreign exchange settlement risk where CLS cannotbe used.

Conducting multiple deals with a counterparty might carry a high level ofexposure on your books at the end of each trading day. As trading activitygrows, you may run the risk of equally increased capital adequacyrequirements. Netting is a means by which such problems can be mitigated.

Netting foreign exchange deals requires only one payment instruction percounterparty, for all deals in the same currency and with the same value date.This therefore reduces both nostro costs, and the costs associated with theworkload in the foreign exchange back-office. Additionally, with a legallyenforceable bilateral netting contract in place, investment managementinstitutions can also benefit from reduced settlement and credit risk.

If a netting process is not fully automated, operational costs and possiblepayment delays could erode profit margins. To fully benefit from netting, it isimperative that both counterparties receive identical information from a single,reliable source that is guaranteed.

140

By using SWIFTNet Accord netting service to net foreign exchange deals,investment management institutions benefit from:- End-to-end financial liability: you can net foreign exchange deals using a

single supplier that takes financial responsibility for subsequent stages ofthe value chain.

- Low-cost integration: instead of deploying and operating a dedicatedsolution for netted deals, you can benefit from utilising your existing foreignexchange back-office environment.

142

8. SWIFTNet Cash ReportingToday, many financial institutions provide their customers with real-timeinformation on account balances and transactions. This information, however,is limited to accounts and transactions that are administered and processedby the servicing institution.

With access to real-time nostro account information this limitation is removed.A financial institution can provide true end-to-end information in real-time toits customers for transactions as they are posted to nostro accounts inremote locations. This gives the customer a consolidated and instantaneousview of its positions in all currencies.

Benefits to investment management institutionsFor investment management institutions (IMIs), the benefits are threefold:- Liquidity management – Real-time provision of information relating to

incoming and outgoing funds enhances the ability of an IMI to manage itsintraday liquidity position.

- Reconciliation – Continuous and instantaneous information enables earlyidentification and resolution of exceptions.

- Risk management – By integrating positions from multiple business areas,across multiple currencies, it is possible to present a complete overview ofexposure in real-time.

nostro JPY

nostro USD

nostro EUR

Investment

management

institution

End to end with real-time nostro

Real-time today

Financial

institution

144

9. File transfer capabilitiesSWIFTNet FileAct supports the exchange of files between two customerswithin a closed user group (CUG). Transferred files may be in either a freeformat or a structured format. The structured format may be either aproprietary-defined format or a SWIFT-defined format.

SWIFTNet FileAct features- support for any type of file content and for the file to be of a size up

to 250 Mbytes- concurrent file transfers and cancelling a file transfer that is in progress- assurance of the data authenticity and integrity- confidentiality of data during file transfers- delivery notification that confirms the file receipt by a receiver- support for non-repudiation of file transfers

SWIFTNet file transfer modesSend (i.e.: put) a file: requestor (initiates file transfer) wants to send a file andrequests responder to be ready to receive the file. When this request isaccepted, the file is transferred from requestor to responder.

Retrieve (i.e.: get) a file: Requestor (initiates file transfer) wants to retrieve afile and requests responder to send a file. When the request is accepted, thefile is transferred from responder to requestor.

SNL SNLSWIFTNet

SNL SNLSWIFTNet

Re

sp

on

de

r

Re

qu

esto

r

File

Act

pu

t F

ileF

ileA

ct

ge

t F

ile

Delivery notification (optional)

File

get request

File

Re

sp

on

de

r

Re

qu

esto

r

File

put request

Delivery notification (optional)

File

146

10. New initiativesSWIFT are continually working with the securities industry to bring newproducts and services to our existing, as well as potentially new users.SWIFT’s latest initiative for our securities users, is around market dataproviders.

10.1. Market data provider initiativeMany financial institutions currently subscribe to multiple Market DataProvider corporate action services, all of which are provided in a proprietaryformat, over proprietary communications.

In consultation with the SWIFT community, SWIFT created an opportunity forMarket Data Providers to take part in a pilot programme that enables them tosend Corporate Action information in the industry standard ISO 15022 format,using SWIFTNet FileAct as the cost-effective mechanism for communication.During the pilot, SWIFT also analysed the benefit of providers being able todistribute other securities-related information, such as Intra-day and OfficialClosing Prices, as well as reference data.

The successful outcome of this pilot programme, which ran from late 2003through to mid-2004, saw the creation of a new category of SWIFT user inJune 2004, thereby allowing Market Data Providers to join the SWIFT network.

Further informationTo obtain further information about SWIFT or on any of the SWIFT services andproducts please contact your SWIFT representative.

Alternatively visit SWIFT’s web site at www.swift.com where you can find detailedoverviews of SWIFTSolutions under the Products & Services tab.

SWIFT offices worldwide

Headquarters - BelgiumAvenue Adèle 1 B-1310 La Hulpe Tel: +32 2 655 31 11

AustraliaLevel 29The Chifley Tower2 Chifley SquareSydney, NSW 2000Tel: +61 2 93 75 2201

ChinaUnit 1106-7Corporate SquareNo. 35 Financial StreetXicheng District, Beijing100032Tel: +86 10 8809 3400

France6th Floor, 4 rue Auber75009 ParisTel: +33 1 53 43 23 00

Germany20th Floor, City-Haus IFriedrich-Ebert-Anlage 2-1460325 Frankfurt am MainTel: +49 69 7541 2200

Hong Kong31/F, One InternationalFinance Centre1 Harbour View StreetCentralHong KongTel: +852 2107 8700

ItalyCorso G. Matteotti, 1020121 Milano Tel: +39 02 7742 5000

Japan2nd floor - AIG Building1-3 Marunouchi 1-chomeChiyoda-ku, Tokyo 100Tel: +81 3 5223 7400

SingaporeUnit 16-02, 80 RobinsonRoadSingapore 068898Tel: +65 6347 8000

South AfricaS.W.I.F.T. SA (Pty) Ltd Building II (B Block) 101 Central Street Houghton 2194, Gauteng Tel: +2711 483 4512

SpainEdificio Cuzco IVPaseo de la Castellana141, 22A28046 MadridTel: +34 91 425 1300

SwitzerlandS.W.I.F.T. SwitzerlandGmbH Freigutstrasse 20 8002 Zurich Tel: +41 43 344 3490

United Kingdom7th floor, The CornExchange55 Mark LaneLondon EC3R 7NETel: +44 20 7762 2000

United States of America200 Park Avenue38th FloorNew York, NY 10166Tel: +1 212 455 18 00

51146-APR05

www.swift.com

Copyright © S.W.I.F.T. SCRL (“SWIFT”) 2005 All rights reserved. Reproduction is however authorised with acknowledgementof the source, reference and date of publication, and all notices set out here. Thispublication is supplied for information purposes only, and shall not be bindingnor shall it be construed as constituting any obligation, representation orwarranty on the part of SWIFT.SWIFT, S.W.I.F.T., the SWIFT logo, Sibos, SWIFTNet, SWIFTAlliance,SWIFTStandards, SWIFTReady and Accord are trademarks of S.W.I.F.T. SCRL.Other SWIFT-derived product and service names, such as but not limited toSWIFTSolutions and SWIFTSupport, are tradenames of S.W.I.F.T. SCRL. SWIFTis the trading name of S.W.I.F.T. SCRL. Patent pending: SWIFTNet.All photographs in SWIFT brochures feature SWIFT employees, customers orbusiness partners.

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