While there’s a lot that can be learned from how global payments are processed and settled, securities processing is far more complex. Even though the securities industry may never achieve the same level of standardization as global payments, harmonizing processes can effectively deliver the same end result. That was the conclusion of panelists speaking at the breakout session, One standard, many implementation approaches: What can securities learn from payments?, at Sibos 2025 in Frankfurt.
In addition to higher levels of complexity, another challenge in what panelists described as a “low margin” business is cost: in particular, convincing market participants that investing in upgrading processes and infrastructure is worthwhile.
“DTCC realizes the value proposition is a challenge for some of our clients,” said Gloria Lio, DTCC Managing Director and Head of Enterprise Services. “But moving to global standards that increase interoperability allows us to deliver enhanced products and services and more value-added business capabilities. Articulating this value proposition is crucial to getting buy-in from market participants.”
Co-existence of Parallel Systems
One feature of the payments ecosystem we already see in securities is the co-existence of parallel systems: some industry participants continue to use legacy systems, while others have upgraded to more modern ISO 20022 standards.
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“We’ve been operating in an environment in which we see the coexistence of different standards in cross-border payments for years,” noted Stephen Lindsay, Head of MIs and Standards Communities, Swift. “In some markets, some payments can operate either on legacy systems or on ISO 20022. The challenge is, we need to make sure that data does not get corrupted along the way.”
One of the ways to ensure interconnectivity of different networks and systems is to adopt clear and consistent standards for a range of things, such as what data must be included, how it must be formatted and how it is communicated essentially ensuring that even if backend systems are different, everything transmitted to other parties is sent in a consistent format that can be read and processed by anyone regardless of the process they use to receive it.
“But moving to global standards that increase interoperability allows us to deliver enhanced products and services and more value-added business capabilities.” – Gloria Lio
Simplification via Modernization
A way to do that is to drive standards across the industry, and that is what DTCC has been doing for many years.
“Like many of our clients, we are on a significant modernization journey at DTCC,” said Lio. “Our goal is to drive industry standards as we continue to modernize. We’ve seen the benefits of ISO 20022 and we’ve played a big role in helping drive its adoption in the U.S., especially with corporate actions.
“Another important part of this modernization drive is simplification,” Lio added. “This will allow us to eliminate 27 legacy files, which will greatly simplified how clients interact with us. Consolidating submission channels is key in this exercise.”
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The Mexican Stock Exchange, the second largest exchange in Latin America after Sao Paolo, is a good example of the value of common standards, which allows interconnectivity with many different market participants spread across geographies with varying regulatory and processing regimes.
“To better connect to the outside world, we needed to harmonize data,” said Lourdes Sohlé Domínguez, Post Trade Product Associate Director with the Mexican Stock Exchange Group. “Around 50% of the transactions on the Mexican exchange are cross-border, so harmonizing data is really important.”
Communication and Adoption
Another challenge in getting market participants ready for changes to processes and procedures is ensuring they are aware well in advance, and that they know what they need to do to get ready. Panelists agreed that it is impossible to overcommunicate.
“Communication is key,” said Lio. “Market participants need to know what the change is, how it affects them and what they need to do to get ready. The move to T+1 is a good example. We engaged in extensive communications with the market, but there were still some clients who came to us quite late in the process to ask quite basic questions. You really cannot overcommunicate.”
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And while the move to T+1 had a very specific target date, the process of harmonizing global securities transactions will likely be far more iterative.
“What we’ve seen is that because there is no ‘big bang’ business case to make the changes all at once, market participants are adopting the new standards piecemeal,” noted Stuart Warner, Head of Strategy and Change, Custody, MSS Operations with Hong Kong and Shanghai Banking Corporation. “We just need to stay tightly joined up as a community of intermediaries.”
The Journey Toward Standardization
Warner also emphasizes that while compatibility and interoperability are good at facilitating transactions among numerous market participants, the end game should be adopting common standards across the board, even if that means iterating along the way.
“Coexistence is great because it creates greater interoperability,” said Warner. “But it comes at a cost: the cost of running duplicative systems, the cost of maintaining duplicative systems, and that it prevents us from achieving the full potential. There is great benefit to moving fully to ISO 20022.”
The journey toward standardization and harmonization in securities is a complex but necessary evolution. As our industry continues to learn from the payments sector and navigates the challenges of modernization, collaboration and clear communication will be vital to unlock greater efficiency, transparency and global connectivity.