by Crystal Bueno

DTCC's drive to standardize its technologies takes another step forward this month, as The Depository Trust Company (DTC) begins making the ISO 15022 global message standard available for certain settlement-related transactions. The remaining settlement transaction message formats are targeted to be available by October.

DTC will support both ISO 15022 and its traditional formats during an extended transitional period. However, the company expects that the redesign of its core book-entry processing system, to be implemented early in the next decade, will require the exclusive use of ISO format messages.

To use ISO 15022 for DTC settlement, firms will need to take certain steps to prepare their systems.

Benefits of the global standard
"Customers will be able to submit and receive settlement notifications in real time, day and night, using internationally accepted standards, said Javette Laremont, DTCC director, Clearance and Settlement Product Management. "This translates into cost savings, risk reduction, global interoperability and greater overall efficiency.

When fully implemented, this change also will strengthen the industry's business continuity by enabling customers to send night deliver orders for immediate processing and receive real-time output from the night cycle.

Enterprise-wide push
DTCC has been working to advance the use of global standards across its systems since the beginning of the decade, gradually transitioning customers away from the organization's traditional formats. "Over the next several years, our goal is to introduce the consistent use of global messaging standards to all our applications, said Donald F. Donahue, DTCC president and CEO.

Business lines that already employ international formats and standards include the Global Corporate Actions Validation Service, Deriv/SERV, the Canadian depository link, the Inventory Management System (IMS), the Omgeo/DTC real-time link and Real-Time Trade Matching. DTCC is also building global standards into the redesign and consolidation of its core systems for securities underwriting and corporate actions.

Key benefits
The rollout of the ISO 15022 standard for settlement followed a successful pilot with a global broker/dealer earlier this year to send and receive settlement-related transactions and commands for payment orders via 15022 messaging.

"Some customers view ISO 15022 as a key element of their settlement infrastructure, since it presents a uniform method by which information can be identified and programmed once, and then reused as needed, said Laremont. "What's more, it is widely used by many European and Asian firms, which contributes to its value for firms operating globally.

 Here are some benefits of communicating settlement status and details using this standard:

• The customer's internal reference number as a part of the message submission, called the Customer Transaction Identifier (CTID), can now be carried throughout the transaction, and included on ISO output back to the customer. This simplifies tracking and monitoring of messages and transaction processing.
• Messages can be linked to track processing throughout the entire transaction lifecycle. This feature also allows for the more efficient management of partial transactions, because positions are classified based on currently settled, pending settlement and to-be-settled positions.
• Structured fields replace previously used free-form text, standardizing communications at the outset of each transaction. This contributes to reducing message units and thus communication costs.
• ISO messaging will give DTC the ability to easily modify fields for improved functionality that participants can migrate to as necessary.

Transaction timetable
In early May, DTC published an Important Notice spelling out the transaction types that can now be handled via ISO message types. These include payment orders, deliverer and receiver confirmations, settlement status and advice, settlement allegement and IMS transaction commands, and acknowledgements and error messaging from the DTCC Universal/CDTS hub.

In June, specifications for deliver order message formats will be published, with the remaining specifications, including collateral pledges and memo segregation, available in October.

"ISO 15022 messaging for settlement will help customers to leverage their global infrastructure, said Laremont. "For DTCC, offering this messaging standard will help achieve consistency across our systems, while positioning us to move toward retiring the traditional message formats. @

[For more information on ISO messaging for settlement, contact Javette Laremont, DTCC director, Clearance and Settlement Product Management, at 212.855.2414 or jlaremont@dtcc.com.]