If you ever had a bank or brokerage account chances are SWIFT was involved:
WHAT IS S.W.I.F.T.
S.W.I.F.T. (the Society for Worldwide Interbank Financial Telecommunication) provides financial data communication and processing services to support the business activities of worldwide financial institutions for securities, payments, foreign exchange and money markets, as well as trade finance. Its dedicated telecommunications network guarantees the rapid, cost-effective, secure and reliable transmission of financial data using a range of ISO-compliant standardized messages that have been developed by S.W.I.F.T. in conjunction with its users and industry organizations.
Originally designed to eliminate the need for paper-based processes in the financial markets, S.W.I.F.T. has also lowered costs, increased productivity and helped reduce risk in the securities industry by providing several of the key elements necessary for the automation of the settlement process, and by providing a reliable and secure network.
S.W.I.F.T. began operations in May 1977, to help banks electronically move large numbers of fund transfers among themselves in a secure and efficient manner. When brokers were admitted in 1987, the members created and began using the Category 5 (CAT 5) message standards to structure settlement instructions, confirmations and safekeeping information for securities transactions.
As of January 1999, over 6,500 institutions use S.W.I.F.T. to communicate with each other 24 hours a day. S.W.I.F.T. operates in 178 countries and processes over 935 million messages each year, with an average daily message volume of over 3.9 million messages, and an average daily transaction value of US$2.5 trillion for payments messages, and an estimated $4 trillion for securities messages.
Owned by nearly 3,000 of its user banks, S.W.I.F.T. also connects other categories of non-bank financial institutions engaged in the securities industry, including:
· Securities broker/dealers
· Investment managers
· Securities exchanges
· Central domestic securities depositories and clearing organizations
· Central cross-border securities depositories and clearing organizations such as Cedel and Euroclear
· Trust Companies and Fiduciary Service Providers
· Custody and Nominee Services Providers
· Registrars
· Transfer Agents
· Investment managers were granted full participant privileges at the June 1992, S.W.I.F.T. Annual General Meeting in Brussels. As participants, investment managers have the right to use the S.W.I.F.T. standards, access the S.W.I.F.T. network, and indirectly participate in setting the future direction of S.W.I.F.T.
· Securities Electronic Trade Confirmation (ETC) Service Providers, a new category of participants, were allowed to join the S.W.I.F.T. network as of June 1996.
Purpose
S.W.I.F.T. plays an important role in increasing the efficiency of the international financial markets. In addition to its worldwide telecommunication network and the increasing number of message standards for financial instruments, S.W.I.F.T. offers software and network-compatible interfaces, as well as several applications that can be used with the network to reduce costs and risk.
The central organization establishes numerous user committees to refine the standards, and holds a conference (SIBOS) for its members each autumn to review what has been accomplished and to set the priorities for the following year.
Allowing investment managers to become participants was a critical step in extending the use of the S.W.I.F.T. securities standards (and potentially the S.W.I.F.T. network) beyond banks and brokers. This expansion of S.W.I.F.T.'s role is significant for individual investment managers, as well as for the entire securities industry.
There has been a significant growth in the use of the S.W.I.F.T. CAT 5 series of messages since they were introduced. While all of the banks and brokers have not yet established a full electronic S.W.I.F.T. connection for securities, almost all can send and receive some of the S.W.I.F.T. CAT 5 message types. As of February 1999, nearly 724,000 CAT 5 messages flowed over the S.W.I.F.T. network each day, out of the total network traffic of 3.9 million messages.
Due to the industry's trend toward message standardization and automated, electronic counterparty connectivity, securities messages have represented S.W.I.F.T.'s fastest-growing market segment for the last four years and again in 1998 and early 1999 (+ 43%). Over 4,000 banks, broker/dealers and investment management firms sent nearly 150 million securities messages through the S.W.I.F.T. network in 1998, accounting for 16% of the total network message traffic. In 1999, securities traffic is again expected to grow by over 40% to nearly 210 million messages.
For most of this decade, the securities industry has been shifting away from the use of free-format messages in favor of specific settlement, reporting and custody-related messages. The use of formatted messages, which are encrypted, validated and authenticated by S.W.I.F.T. as part of a firm's overall message routing process, leads to more efficient and reliable communication between parties. Increased back office automation using the standard will result in fewer errors and investigations, and more timely reconciliation.
S.W.I.F.T.'s current strategy is to position itself to support all aspects of the securities processing value chain, from issuance to issue servicing, by extending the scope of its message standards. This puts S.W.I.F.T. potentially into competition with other service organizations such as the DTC and with vendors such as Thomson and other application vendors.
To avoid direct competition and to serve the industry in as many ways as possible, S.W.I.F.T. has elected to move away from developing applications. Instead, S.W.I.F.T. has shifted its focus toward cooperating with industry organizations and vendors; and is working to connect its network to these organizations whenever possible.
As S.W.I.F.T. began supporting securities firms several years ago, it concentrated on adding new broker and investment manager users to the network. More recently, while continuing to add new users, the emphasis has shifted to helping existing participants use S.W.I.F.T. more effectively. To do this, S.W.I.F.T. has/is:
· Decreased its emphasis on developing and distributing proprietary software
· Increased is emphasis on working with application vendors
· Established a process to measure and report each participant's traffic (Traffic Watch)
· Established a process to measure and report on each participant's STP rates when using S.W.I.F.T. (STP Watch)
· Implementing a new TCP/IP based network that will allow real-time transmission of certain categories of messages
WHAT DOES S.W.I.F.T. PROVIDE?
S.W.I.F.T. offers its members a set of standards, a modern telecommunications network, network compatible terminals/interfaces, some software based services and increasingly relies upon third party application providers to deliver value-added products to the industry. Firms can use the standards for free and decide if they want to use the network and the applications provided by S.W.I.F.T.'s vendor partners.
As one of the primary organizations creating international standards for financial services firms, S.W.I.F.T. works closely with ISO (International Standards Organization), ISSA (International Society of Securities Administrators), ISITC (Industry Standardization for Institutional Trade Confirmation), FIBV (Federation Internationale des Bourses), and FIX to support and enhance the S.W.I.F.T. CAT 5 series of securities message types.
There are ten major categories of S.W.I.F.T. messages that support all of the processing activities of S.W.I.F.T.'s members:
Customer Payments and checks
Financial Institutions Transfers
Financial Trading (FX, Loans, SWAPS, etc.)
Collections and Cash Letters
Financial Trading (Securities)
Precious Metals Trading and Syndications
Documentary Credits and Guarantees
Traveler's Checks
Cash Management and Customer Status
Securities firms can use these messages for transactions involving securities, cash, and foreign exchange.
The S.W.I.F.T. ISO Securities Messages that are listed below cover the complete life cycle of a securities transaction, from trading to settlement, including custody and reporting. The messages that support securities processing are in the S.W.I.F.T. CAT 5 series, which consists of eight general groups. These groups cover all facets of securities processing, from trading to settlement and safekeeping. The eight groups are:
· General Messages
· Trade Orders and Confirmations
· Securities Lending and Borrowing
· Settlement Instructions and Confirmations
· Corporate Actions
· Capital and Income
· Inter-depository and Clearing Institutions
· Statements
WHAT IS S.W.I.F.T.
S.W.I.F.T. (the Society for Worldwide Interbank Financial Telecommunication) provides financial data communication and processing services to support the business activities of worldwide financial institutions for securities, payments, foreign exchange and money markets, as well as trade finance. Its dedicated telecommunications network guarantees the rapid, cost-effective, secure and reliable transmission of financial data using a range of ISO-compliant standardized messages that have been developed by S.W.I.F.T. in conjunction with its users and industry organizations.
Originally designed to eliminate the need for paper-based processes in the financial markets, S.W.I.F.T. has also lowered costs, increased productivity and helped reduce risk in the securities industry by providing several of the key elements necessary for the automation of the settlement process, and by providing a reliable and secure network.
S.W.I.F.T. began operations in May 1977, to help banks electronically move large numbers of fund transfers among themselves in a secure and efficient manner. When brokers were admitted in 1987, the members created and began using the Category 5 (CAT 5) message standards to structure settlement instructions, confirmations and safekeeping information for securities transactions.
As of January 1999, over 6,500 institutions use S.W.I.F.T. to communicate with each other 24 hours a day. S.W.I.F.T. operates in 178 countries and processes over 935 million messages each year, with an average daily message volume of over 3.9 million messages, and an average daily transaction value of US$2.5 trillion for payments messages, and an estimated $4 trillion for securities messages.
Owned by nearly 3,000 of its user banks, S.W.I.F.T. also connects other categories of non-bank financial institutions engaged in the securities industry, including:
· Securities broker/dealers
· Investment managers
· Securities exchanges
· Central domestic securities depositories and clearing organizations
· Central cross-border securities depositories and clearing organizations such as Cedel and Euroclear
· Trust Companies and Fiduciary Service Providers
· Custody and Nominee Services Providers
· Registrars
· Transfer Agents
· Investment managers were granted full participant privileges at the June 1992, S.W.I.F.T. Annual General Meeting in Brussels. As participants, investment managers have the right to use the S.W.I.F.T. standards, access the S.W.I.F.T. network, and indirectly participate in setting the future direction of S.W.I.F.T.
· Securities Electronic Trade Confirmation (ETC) Service Providers, a new category of participants, were allowed to join the S.W.I.F.T. network as of June 1996.
Purpose
S.W.I.F.T. plays an important role in increasing the efficiency of the international financial markets. In addition to its worldwide telecommunication network and the increasing number of message standards for financial instruments, S.W.I.F.T. offers software and network-compatible interfaces, as well as several applications that can be used with the network to reduce costs and risk.
The central organization establishes numerous user committees to refine the standards, and holds a conference (SIBOS) for its members each autumn to review what has been accomplished and to set the priorities for the following year.
Allowing investment managers to become participants was a critical step in extending the use of the S.W.I.F.T. securities standards (and potentially the S.W.I.F.T. network) beyond banks and brokers. This expansion of S.W.I.F.T.'s role is significant for individual investment managers, as well as for the entire securities industry.
There has been a significant growth in the use of the S.W.I.F.T. CAT 5 series of messages since they were introduced. While all of the banks and brokers have not yet established a full electronic S.W.I.F.T. connection for securities, almost all can send and receive some of the S.W.I.F.T. CAT 5 message types. As of February 1999, nearly 724,000 CAT 5 messages flowed over the S.W.I.F.T. network each day, out of the total network traffic of 3.9 million messages.
Due to the industry's trend toward message standardization and automated, electronic counterparty connectivity, securities messages have represented S.W.I.F.T.'s fastest-growing market segment for the last four years and again in 1998 and early 1999 (+ 43%). Over 4,000 banks, broker/dealers and investment management firms sent nearly 150 million securities messages through the S.W.I.F.T. network in 1998, accounting for 16% of the total network message traffic. In 1999, securities traffic is again expected to grow by over 40% to nearly 210 million messages.
For most of this decade, the securities industry has been shifting away from the use of free-format messages in favor of specific settlement, reporting and custody-related messages. The use of formatted messages, which are encrypted, validated and authenticated by S.W.I.F.T. as part of a firm's overall message routing process, leads to more efficient and reliable communication between parties. Increased back office automation using the standard will result in fewer errors and investigations, and more timely reconciliation.
S.W.I.F.T.'s current strategy is to position itself to support all aspects of the securities processing value chain, from issuance to issue servicing, by extending the scope of its message standards. This puts S.W.I.F.T. potentially into competition with other service organizations such as the DTC and with vendors such as Thomson and other application vendors.
To avoid direct competition and to serve the industry in as many ways as possible, S.W.I.F.T. has elected to move away from developing applications. Instead, S.W.I.F.T. has shifted its focus toward cooperating with industry organizations and vendors; and is working to connect its network to these organizations whenever possible.
As S.W.I.F.T. began supporting securities firms several years ago, it concentrated on adding new broker and investment manager users to the network. More recently, while continuing to add new users, the emphasis has shifted to helping existing participants use S.W.I.F.T. more effectively. To do this, S.W.I.F.T. has/is:
· Decreased its emphasis on developing and distributing proprietary software
· Increased is emphasis on working with application vendors
· Established a process to measure and report each participant's traffic (Traffic Watch)
· Established a process to measure and report on each participant's STP rates when using S.W.I.F.T. (STP Watch)
· Implementing a new TCP/IP based network that will allow real-time transmission of certain categories of messages
WHAT DOES S.W.I.F.T. PROVIDE?
S.W.I.F.T. offers its members a set of standards, a modern telecommunications network, network compatible terminals/interfaces, some software based services and increasingly relies upon third party application providers to deliver value-added products to the industry. Firms can use the standards for free and decide if they want to use the network and the applications provided by S.W.I.F.T.'s vendor partners.
As one of the primary organizations creating international standards for financial services firms, S.W.I.F.T. works closely with ISO (International Standards Organization), ISSA (International Society of Securities Administrators), ISITC (Industry Standardization for Institutional Trade Confirmation), FIBV (Federation Internationale des Bourses), and FIX to support and enhance the S.W.I.F.T. CAT 5 series of securities message types.
There are ten major categories of S.W.I.F.T. messages that support all of the processing activities of S.W.I.F.T.'s members:
Customer Payments and checks
Financial Institutions Transfers
Financial Trading (FX, Loans, SWAPS, etc.)
Collections and Cash Letters
Financial Trading (Securities)
Precious Metals Trading and Syndications
Documentary Credits and Guarantees
Traveler's Checks
Cash Management and Customer Status
Securities firms can use these messages for transactions involving securities, cash, and foreign exchange.
The S.W.I.F.T. ISO Securities Messages that are listed below cover the complete life cycle of a securities transaction, from trading to settlement, including custody and reporting. The messages that support securities processing are in the S.W.I.F.T. CAT 5 series, which consists of eight general groups. These groups cover all facets of securities processing, from trading to settlement and safekeeping. The eight groups are:
· General Messages
· Trade Orders and Confirmations
· Securities Lending and Borrowing
· Settlement Instructions and Confirmations
· Corporate Actions
· Capital and Income
· Inter-depository and Clearing Institutions
· Statements
