A pervading atmosphere of gloom surrounded Sibos, the annual operations conference of the financial messaging operator Swift, at Geneva in early October. The twin conference themes – resilience and value – did little to stimulate any real debate and the economic downturn had cast a pall over the 250 companies in the parallel exhibition.
Long regarded as a payments industry network, Swift has striven for the past decade to make its mark in the securities industry. Securities message traffic is its fastest growing sector and the organisation argues that its common message standards will enable securities industry participants, particularly fund managers, to substantially reduce costs and operational risk and increase efficiencies. If all the players in the securities transaction chain – investment managers, broker dealers, custodians and central securities depositories (CSDs) – were to use such standards, manual intervention would be all but eliminated and straight through processing rates would soar.
Yet Swift continues to struggle in bringing asset managers on board. In the US market in particular, it is considered to be a European organisation, focused on payments. For many smaller fund managers, signing up to Swift is an expensive luxury. The alternative of communicating via faxes and telex remains for many the preferred option.
Swift believes its role as a standards setting body is vital to its future in the securities industry. However, the migration to the new ISO 15022 standard for securities messages, of which Swift is the registration authority, has been something of a disaster.
On 16 November, the existing ISO 7775 securities message standard will be shut down and securities industry participants will have to use the new 15022 standard. Aware that many fund managers would not be ready for the cutover, Swift developed an interim solution – a closed message user group that ‘quarantines’ non-15022 users from the main Swift network. The group enables users who are not ready for the migration to send or receive the existing ISO 7775 messages. In order to encourage institutions to migrate to 15022, charges for non-compliance will be applied that will increase over time.
Worryingly for Swift, some delegates at the Sibos session on migration to 15022 were sceptical about Swift’s motives, suggesting that the MUG was nothing but a money-making venture. The scale of the challenge to migrate on to 15022 was detailed by Colin Brooks, deputy head of custody and clearing at HSBC. The bank had spent more than two years in client testing, exacerbated by a ‘lack of guidance from Swift’ in overcoming interpretation problems, said Brooks.
Later in the week, Swift was in for another shock when its keynote asset management industry speaker, Donald Brydon, chairman of AXA Investment Managers, told his fellow panellists on the securities market plenary session, who included representatives from custodians, investment banks and CSDs: ‘At the risk of being unpopular, I would argue that asset managers are not part of your industry. As asset managers, we are part of our own industry and we are the customers of your industry.’ If members of the securities industry wanted to implement initiatives to improve efficiencies, then they should approach fund managers as clients – “make us a business proposal and we’ll consider it,” says Brydon.
Brydon did at least admit that the asset management industry had committed less funds to its operational infrastructure than it should have. However while senior executives in the securities industry may now be starting to take an interest in operations and technology, as Hal McIntyre, managing partner of The Summit Group, the US-based consultancy, said, it is hardly the right time, economically, to be investing in industry initiatives.
Incorporating fund managers into the wider world of Swift and operational efficiency is clearly going to take much more time and effort than anyone at Swift has imagined. Welcome to the world of insecurities.

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