SWIFT info paper
May 2021

The SWIFT platform forcapital markets: Yourmission, our vision

The SWIFT platform forcapital markets: Yourmission, our vision

Introduction
The conundrum: Many
operating models, many
challenges
Time for a new approach:A collaborative post-trade
platform
Critical elements in creating
a post-trade platform
The benefits of acollaborative platform arewell aligned with industry
requirements
Making this vision a reality
Building for and with ourcommunity
How can you take part?

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Introduction

Facing increased upstream disintermediation, growing competition,
new regulations, tokenised assets, high costs of doing business,cyber threats and evolving customer expectations, capital markets
players need to be more agile than ever. While financial institutions
are at different stages of their digital transformation journey, many are
now re-evaluating their business models, operational flows andpartnership arrangements, as well as amplifying their regulatorycompliance game and refreshing their technology stacks.
Yet keeping costs in check, increasing efficiency and providing
customers with the level of experience they demand remains achallenge. In this environment, the need has never been greater tore-evaluate how the post-trade industry operates and to transformthe way capital market services are provided. That’s why, incollaboration with our community, we are reengineering the SWIFT
platform.

“This is the start of an exciting
journey. Our strategy leverages
SWIFT’s unique position as aneutral cooperative to bring
together key industry voices
to tackle the challenges facing
capital markets. We lookforward to co-creating future
proof solutions to industry
challenges and helping toshape the future of capital
markets.”
Charifa El Otmani
Director Capital Markets Strategy, SWIFT

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Our goal is to enable smarter securities processes throughexpanded platform capabilities such as tracking of securities
settlement instructions as well as analytical tools covering all
holdings – securities, cash and others. This smarter processing will
help our community avoid or better address settlement failure andother types of exceptions, and reduce the cost of doing business.

This paper takes a closer look at recent
post-trade operating models and thechallenges that come with them. It thensheds light on the benefits and capabilities
that the industry demands moving forward
and lays out the key components crucial in
the development of an industry platform.
Finally, we share our plans to enhance theSWIFT platform in line with your businessand operational objectives.

The conundrum: Many
operating models, many
challenges

Various solutions have been tried and tested in the quest to reduce
costs, increase efficiency and enhance customer experience.
Taking an “inside-out” view, some players have adopted theapproach of building out their front-to-back capabilities andlook at internal integration strategically. Working on constantly
shifting grounds, it is common to hear of participants outsourcing
segments of their post-trade activities to third-party providers. It’s
estimated that 45% of investment banks are currently outsourcing
post-trade operational activities, of which 28% have plans to expand
the scope for outsourcing activities.1 Some players have expanded
their technology and service capabilities through vertical acquisitions
such as State Street’s completion in 2018 of its acquisition of Charles
River Development and Blackrock’s extension of its Aladdin portfolio
management offering.
All good, but… to successfully achieve firm-wide alignment often
requires an operational overhaul, streamlining of front-to-backprocesses and addressing legacy systems, which involves significant
time and resources, not to mention migration risks. We also still hearof participants having to maintain large infrastructures, particularly forpost-trade processing, and are constantly challenged by the verysame conventional operational obstacles that they were trying toalleviate. For example, standalone firm-wide integration is missing thecounterparty view and often, to resolve exceptions, institutions still
have to contact their counterparties, adding to frictions anddisrupting the straight-through processing (STP).
In the spirit of industry collaboration, some players havepartnered with fintechs, formed consortiums or co-createdwith industry peers. It is an opportunity to simplify their existingarchitecture and externalise non-differentiating or non-criticalservices. Over 40 market utilities exist in the financial services
industry.2 It is a symbiotic, cost and time efficient approach toleveraging the latest innovative solutions that the industry has to offer,often focusing on specific operational functions that can be scaled
and integrated into full service models. Examples include Symphony,a platform for secure communication and workflow management
between financial institutions; and Proxymity, an industry-backed
platform specialising in investor communications.

Post-Trade Processing, Investment Banks Rethink
Third-Party Strategies, Oliver Wyman 2017

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Strategy&, PWC, Market Utilities in Financial Services:
What Role Will You Play, 2016

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All good, but… such alliances are not easy to execute. It raises
challenging questions like: How best to align business agendas?
What is a balanced and fair governance structure? How to manage
the go to market? Who will be the infrastructure host? Who will bear
the risks and responsibilities? And, most of all, who will foot the bill?
Many have successfully closed the services loop by offering
their solutions through microservice-based post-trade
platforms, leveraging innovative new technologies. Again, allgood but… the currently limited scale for these solutions, andaggressive competition have resulted in a fragmented post-tradeenvironment. Furthermore, implementing standalone solutions, insmall groups or via closed consortiums, lacks ubiquitous reach andthe ability to scale, and is limiting in terms of interoperability acrosssegments.

“As an ecosystem, bycollaborating to remove
inconsistencies and increase
standardisation in areas where
we don’t compete, we canfocus much more on driving
forward value-added innovation.
And that’s a good thing for thewhole industry.”
Hannah Elson
Head of Global Custody, EMEA, J.P. Morgan

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As the financial industry accelerates its
evolution – especially post-Covid – withextensive digitisation and service
innovation, we believe the industry’s survival
lies in transforming various market
operational initiatives into a single,
collaborative market utility. One that offers
the capital markets community amutualised post-trade platform that isinteroperable across geographies,
securities segments and multiple
generations of back-office systems. One
that is scalable, transparent, and enables
real time, frictionless and secure financialtransactions.

Time for a new
approach:
A collaborative
post-trade platform

While the various operating models mentioned above each have theirown benefits, they also have their limitations, especially in an
increasingly fragmented post-trade environment. In addition, service
quality concerns and the cost pressures of technology maintenancehave made capital markets players more receptive to shared services
that the industry as a collective can offer and benefit from.
Market participants are demanding operational excellence and aconvenient user experience from their service providers –incumbents and new solution providers alike – in order to help
elevate their post-trade capabilities. To achieve this, we must go
beyond traditional sequential messaging. As capital market players
transition into the next phase of their growth journey, high levels of
security and scalability have become minimum base requirements.
For capital market players, a collaborative platform is an opportunity
to take the next step forward on how they provide services to theircustomers and drive increased efficiency across the industry as awhole. Such a model presents many advantages such as economies
of scale in the quest for operational and cost efficiencies, alleviationof transaction frictions through transparency, improved risk
management and opportunities for industry innovation throughanalytics on consolidated information.

For participants, acollaborative post-trade
platform brings:

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A secure and trusted
ecosystem

A platform creates a means of connection forusers across segments, asset classes andmarkets, enabling them to transact andinteract in a highly secure, reliable and trusted
ecosystem.

Access to specialised
services and solutions

Through a well-connected and agile post-trade
network, and capabilities based on the latest
technologies and tools, platform users haveaccess to many specialised services andsolutions to support their post-trade flows.

Ability to innovate andscale to industry
requirements

Global platforms build on strength in numbers
and the breadth of reach of their participants.
The more users that connect and contribute,the faster it is to develop, scale and share
services for the benefit of the participants ofthe ecosystem as a whole.

Interconnectivity andcollaboration

A collaborative platform offers the opportunity
to connect with ease and plug into otherplatforms, providers and external data sources
with the objective of providing an industrialstrength solution.

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geIndustry post-trade processing demands can be addressed by transitioning from sequential
messaging to an end-to-end view of transactions via a secure, collaborative platform.
Source: SWIFT

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MessagingTransaction
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Critical elements increating a post-trade
platform

To introduce meaningful transformations
when building an effective post-trade
platform, underlying elements have tokeep pace with the evolving values ofmodernising financial systems andprocesses. Among the considerations
are:Ease of onboarding

The fast pace of developments in capital markets today calls for a“plug and play” onboarding experience to the platform. Easy tointegrate, user friendly and light implementation requirements – forinstance through APIs and the use of cloud technologies – areamong the common demands of market participants. The ability toquickly connect to the platform helps reduce time to market,
minimise operational interruptions to existing back-officeenvironments and save on implementation costs.

Bridge thestandardisation gap

A shared platform is also a way to enable the industry to
collaboratively “pace-set” and introduce higher levels ofstandardisation to operational aspects, including security
components, data models, market practices, as well as service levelagreements to transaction flows.
From a standards messaging perspective, it is understandable thateach entity will want to transform their data and adopt standards attheir own pace. Not all back-office applications will be ready to adopt
the same message standard or data format from day one. While theplatform’s core will be based on ISO 20022, participants will be able
to choose the communication formats they wish to use when theyinteract with, consume or provide information to the platform. The
platform can be pervasive and flexible in terms of accepting financial
information in different formats, protocols and channels – ISO 15022,
ISO 20022, APIs, FIX, or even free format.

8In addition to translation capabilities, the platform should be capableof the agile retrieval and distribution of data, and provide thereference format for different connectivity points. Increased levels ofstandardisation will have a positive effect on market harmonisationand interoperability across segments. This ultimately lowers thebarriers to participation to the platform and reduces industry
operational risk. Further, the platform stands to unlock scalable
industry value by aligning the approach of innovative technology like
APIs with a common language and rich data model like ISO 20022.

Intuitive, enriching
and transparent
transaction flows“The SWIFT network effectcan help drive the adoptionof standards of not only
formats but also transaction
identifiers that help facilitate themuch demanded transaction
transparency.”
Jason Brasile
Vice President, Product Management, State
Street9Participants must be able to track and trace transaction movementswith ease along the transaction flow. Transaction tracking and tracing
should also not be limited to linear and singular business flows either.
This can be facilitated by using a correlating global tracking reference
that transposes through links across different flows. For instance, thetwo legs of a settlement instruction, or at a more sophisticated level,a corporate action with a link back to the ensuing settlement offunds.
As the information is communicated downstream, a copy of thetransaction information should be stored safely on the platform alongwith its unique transaction status and tracking reference. At thesame time, it is important that participants along the post-tradetransaction flow have timely end-to-end visibility of the transaction
and status updates of any action performed or update received– such as the matching status at the central securities depository(CSD) – along the processing chain. For processes like prevalidation of essential settlement data, this helps reduce repetitiveand duplicative efforts along the chain and may facilitate dataenrichment.

Safeguard data
privacy andcybersecurity while
ensuring effective
financial crimecompliance controls

Transactions in high volumes and at high values, which settle quickly
and are often sent right before cut-off times, make the securities
industry an attractive target for cyberattacks. There are multiple
points of entry for attackers too, given the industry’s complex
structure and long transaction chains.
Among the chief priorities of any platform is security of the data thatit processes and stores. Specifically designed embedded andmandatory security controls should be implemented to safeguard thedata security and privacy of the platform and its participants. Equallyimportant is the possibility to screen transactions, specifically theasset identifier and issuer, against international sanctions lists, as well
as client data to reduce the risk of non-compliance. Similarly, theplatform should help automate and centralise know-your-customer(KYC) checks specific to the capital markets, and support anti-fraud
protection.

Market inclusivenessTo create value and offer holistic business benefits, the platform
should address post-trade transaction needs for the various capital
markets segments, and the related business areas. This extends theplatform capabilities to firms providing payments, FX and liquidity
management services, thereby enabling a holistic offering along thesecurities flow across the financial ecosystem. For this, the platformneeds to be able to attract and host diverse user segments fromacross the financial industry, and make the collective creation ofvalue and tangible shared benefits possible.
As the distinction between capital market players and fintechs isgradually being blurred, the platform should be capable of facilitating
the processing of not only traditional multi-asset classes, but also
consider over time tokenised assets as part of its value offering.
Naturally, this will enable the growth of an ecosystem that will allow
both incumbents and new entrants to validate collaborative
partnerships on the same platform, with access to a single pool ofliquidity and asset class agnostic settlement.

10Market collaboration and interconnectivity extends to strategic
connections through vendor partnerships and external data sources
as well. This enhances the platform’s ability to utilise and processexternal data with the help of innovative means such as artificial
intelligence (AI), machine learning (ML), predictive models andbenchmarking tools. It is also an opportunity for third-party solutions
to tap into the quality data made available on the platform and in turnoffer value-added services to the participants.

Future proof

The platform should be dynamic to not only alleviate today’s
challenges, but also be ready for the future. The platform and its
participants must be prepared to look beyond today’s available
technology and consider the potential in a collaborative and valuegenerating environment that leverages co-creation initiatives among
financial institutions, services providers and other third parties.
Options for interoperable or customised applications developed byproviders that can be further enriched or distributed via the platform
should also be available for the platform community.
Essentially, the platform should function as a self-sustaining
marketplace for post-trade services. And, as a collaborative platform,
framed by an appropriate governance process, participants andvendors can also use it to grow and connect their business,
products and services as well, thus extending the value of theplatform.

“Standardisation andinteroperability in offered
solutions to enable a moreseamless integration andcoexistence period, is critical
towards the success of andaccess to new unified platform
models. And SWIFT is in aunique position to offer thisthrough its new platform
strategy.”
Russ Stamey
Senior Vice President, Global Services,
Northern Trust

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The benefits of acollaborative platform
are well aligned withindustry requirements

The benefits of a collaborative post-trade
platform model come from thecapabilities of the platform itself, as wellas the value the community of users
creates on the platform. These benefits
can be broken down into four main types:

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Faster transaction
processing andimproved visibility

Frictionless transaction processing is among the intrinsic values of aplatform. This directly translates into shorter transaction processing
times. Greater visibility along the processing chain also facilitates
accelerated settlement timelines by enabling the detection andcorrection of possible settlement failures before they happen, further
enabling operational efficiencies on a collective level. Costs can bebetter managed through fewer interventions, investigations and,ultimately, increased settlement certainty through improved
reconciliation, whether for settlement, securities financing, or asset
servicing-related flows.

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Revenue generating
opportunities

By feature and service design, the platform prioritises the needs ofthe community. It helps with the heavy operational lifting and allows
participants to free up resources to focus on higher profit margin andadded-value activities within their core business. Benefits from theplatform may start at the transaction level but inevitably lead to thestrategic relationships formed among platform participants.
Wider utilisation of the platform and its shared services will
accelerate cost efficiencies across the community, encourage faster
realisation of mutual operational benefits and increase the adoption
speed of service refinements. It also lays the groundwork for further
revenue generating products and services developed by users of theplatform.

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3

Access to highquality data foractionable insights

Whether based on information exchanged over the platform orsourced from trusted third parties, the platform provides avenues forthe community to expand on the potential of transaction data forprocess improvements such as pre-validation of essential data,
sanctions screening, transaction tracking, exception management
and case resolution. Similarly, data analytics can be applied to
identify new investment opportunities as well as to measureperformance of counterparties and service providers, benchmarking
against the entire industry’s flows.
With appropriate embedded capabilities, the platform can correlate
and aggregate data into meaningful business insights – andpotentially predictions – such as multi-asset holding positions
including cash and securities, across geographies and servicing
parties, and accounting for payments, securities and foreignexchange transactions. Among other benefits, this can help provide
empirical evidence from the aggregate of transactions and holdingson the platform to underpin smarter investment decisions, identify
new sources of revenue, reduce credit lines and better manage
operational risks and costs.

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Enables amarketplace ofusers and innovativeideas

The platform creates opportunities to connect users and service
providers, strengthening strategic business relationships. It serves as
an industry marketplace, where its community and third parties canleverage the native capabilities of the platform and enrich theirapplications in areas such as compliance, risk management,
regulatory requirements, visibility throughout the settlement andreconciliation value chain, workflow automation and reporting.
The platform is a marketplace that induces sustainability by bringing
together both users and providers to catalyse developments within
its community and incentivise co-creation initiatives that introduce
new value-added services to support business growth. In essence,the platform gives access to a broad and connected potential clientbase for third parties, and access to best-in-class third-party
solutions to clients, complementing the platform’s embedded corefunctionalities.

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Making this visiona reality

We have heard the demands for acollaborative post-trade platform of the kinddescribed above and are building on ourstrong foundation as an industry
cooperative with high levels of community
participation to make it a reality.
Its benefits are clear and will provide extensive returns to thecontinued development and sustainability of the industry. Together
with our community, we are transforming the SWIFT platform toprovide a smarter, faster and better way of managing transactions.
We put responsible, purpose-led innovation at the heart of everything
we do and work closely with our community to explore, develop, test
and deploy improvements in our products. We aim to uncoverhidden opportunities and value creation in service offerings that may
not be possible in today’s fragmented market.
We carry with us a wealth of experience built through the manymarket-leading initiatives and transformation projects that we havebeen a part of, including T2S, SWIFT gpi and ISO 20022, to name afew. This is evidence to our tenacity and capability in delivering
complex and multi-term technology projects at scale.

About the transformed SWIFT platform

Next generation
Agile, well-connected global post-trade network
built with best-in-class technology and tools

Connected
Accessible, interconnected, easy to integrate
and efficiently plug into data sources

Collaborative
Built for the community, driven by thecommunity, from all segments of the capital
markets

Trusted and secured
Built on a resilient, secure and trusted
operational ecosystem. At the forefront ofcyber intelligence sharing and best practices

Shared efficiencies
Leverages cross-collaboration and open
knowledge sharing to develop industry solutions

Growth enabler
A platform that is designed to be
your business growth partner14

We are a leading proponent of market harmonisation and our vision
is to become a connector to other platforms. By fostering highquality data, system security and trust, we aim to seamlessly bridge
existing and new platforms.
Our goal is to scale at speed with our community through accessible
platform connectivity options. Appreciating the need for convenient
on-boarding and implementation, we aim to provide participants withthe ability to plug-and-play – namely through APIs and cloudtechnology – with short integration timelines and minimised impact
on existing systems.
Safety and security are at the heart of everything we do, and we’vetaken this principle into our new platform strategy as well. And on topof this, the Customer Security Programme continues to help capital
market participants secure their SWIFT-related infrastructure, policies
and practices.
In the true SWIFT community-centric spirit and thecooperative construct that we operate in, our platform visionputs financial institutions first. And as a global and neutral
infrastructure connecting over 11,000 financial institutions,
we are strongly committed to providing a safe, trusted andresilient environment for both customers and providers.

Platformtransformation inprogress

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We are exploring thefollowing areas with ourcapital markets
community as part ofour enhanced platform
vision:1

Visibility throughout
the settlement andreconciliation value
chain

2

Real-time view ofmulti-asset holdings

3

Tokenised assets
and future proof
developments

1Visibility throughout
the settlement andreconciliation value
chain

We are exploring how the platform can enable increasedtransparency via a single end-to-end view of transactions and critical
pre-validation services, in particular by enriching securities standing
settlement instructions (SSI) in flow. Early detection of errors helps
participants reduce costs; manage risks associated with settlement
failure by ensuring issues are detected early on; and gain actionableinsights shared throughout the transaction chain.
Just as inaccurate SSI reference data is an important source of
operational failures, we are also looking to include screening ofInternational Securities Identification Numbers (ISINs) against
sanctions lists as part of our pre-validation services, as acomplement to our financial crime compliance portfolio.
After securities settlement, the power of the transformed SWIFT
platform will be deployed towards other securities flows like
corporate actions, collateral management and investment funds.

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2

Real-time view ofmulti-asset holdings

In addition to transaction tracking, the platform will enable securities
servicing institutions to build real-time global balances across all
cash and holdings for their customers. By offering dynamic accessto operational data, users will be able to better understand where tofocus and have the possibility to integrate this with their intraday
reporting based on data exchanged over SWIFT.

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Tokenised assets
and future proof
developments

The platform will enable the financial industry to better prepare forthe future. We will also explore collaboration with our community inareas where asset tokenisation and traditional finance are merging.
This includes navigating the challenges of market fragmentation by
developing the necessary standards to support the secure transfer
of tokenised assets.

Building for and withour community

The strength of the SWIFT community
is that it provides the solid base ofparticipants necessary to build thefoundation of the platform.
With our community, we are now working to make this vision a
reality. A thriving platform powered by the contribution andcommitment of participants of the very market it serves. A platformthat will transform how post-trade interactions take place in the futureand how better data quality and efficiency gaining services areshared.
The success of this vision relies on the contribution and active
support of all participants. We invite everyone interested in shaping
this future to join us on this journey. Not only as participants of theplatform, but also as co-creators in defining post-trade processing
efficiencies for the global financial community.

How can you
take part?

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There are a number of engagement groups
and pilot projects ongoing as part of thistransformation. To learn more about how
you can get involved in shaping the futureof post-trade processing, contact yourSWIFT account manager or email us atsecurities@swift.com.

About SWIFT
SWIFT is a global member owned cooperative and theworld’s leading provider of secure financial messaging
services.
We provide our community with a platform formessaging and standards for communicating, and
we offer products and services to facilitate accessand integration, identification, analysis and regulatorycompliance.
Our messaging platform, products and services
connect more than 11,000 banking and securities
organisations, market infrastructures and corporate
customers in more than 200 countries and territories.
While SWIFT does not hold funds or manage
accounts on behalf of customers, we enable our
global community of users to communicate securely,exchanging standardised financial messages in a
reliable way, thereby supporting global and local
financial flows, as well as trade and commerce all
around the world.
As their trusted provider, we relentlessly pursue
operational excellence; we support our community
in addressing cyber threats; and we continually seek
ways to lower costs, reduce risks and eliminate
operational inefficiencies. Our products and services
support our community’s access and integration,business intelligence, reference data and financial
crime compliance needs. SWIFT also brings thefinancial community together – at global, regional
and local levels – to shape market practice, define
standards and debate issues of mutual interest orconcern.
Headquartered in Belgium, SWIFT’s international
governance and oversight reinforces the neutral,
global character of its cooperative structure. SWIFT’s
international office network ensures an active
presence in all the major global financial centres.

© SWIFT
57498 - May 2021

For more information about SWIFT,
visit www.swift.com.