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Apr 01, 2010 • DTCC Connection

DTCC Champions Message Standards

by Helen Cunningham


DTCC’s language capabilities are one indicator of its commitment to global interoperability and industry efficiency.


– Rob Palatnick, DTCC managing director, IT Architecture

“We communicate in the industry’s languages,” said Rob Palatnick, DTCC managing director, IT Architecture Office. “For more than a decade, we have been leveraging existing protocols and working with customers and global industry organizations to develop new messaging formats. We are committed to interoperability with all supported industry standards.”


Today, most services offered by DTCC subsidiaries are available through international industry-standard messaging protocols, and all new products and enhancements built by DTCC use these standards. Additionally, as DTCC reengineers and renews its legacy systems, the existing communications protocols are being supplemented with, or replaced by, industry standard messages.


The corollary to this trend is that DTCC’s proprietary messaging languages are fast becoming obsolete.


Benefits of common languages

“DTCC’s implementation of standard messaging languages facilitates interoperability in the U.S. and across borders,” said Palatnick. “It also increases efficiency and transparency, mitigates risk and reduces costs for the industry.”


‘DTCC’s implementation of standard messaging languages facilitates interoperability in the U.S. and across borders. It also increases efficiency and transparency, mitigates risk and reduces costs.... The industry gets a lot of reuse from the investment it makes in standards, and DTCC’s implementation of messaging standards allows customers to further leverage their own infrastructures.’

– Rob Palatnick, DTCC managing director, IT Architecture Office


Many financial services firms have already invested in industry standards and can easily extend those capabilities to support messaging protocols for services offered by DTCC subsidiaries, according to Palatnick. “The industry gets a lot of reuse from the investment it makes in standards, and DTCC’s implementation of messaging standards allows customers to further leverage their own infrastructures.”

While DTCC no longer develops proprietary standards nor adds new functionality to legacy standards, it has not yet retired all the older formats.


“Our commitment to messaging standards is balanced by our recognition that some customers need flexibility in getting there,” said Palatnick. “For firms that need more time to make the transition, we are keeping certain proprietary formats available for the time being.”


Under the standards umbrella

DTCC’s adoption of standards aligns with its commitment to expand globally to serve customers.


As early as 2000, DTCC subsidiaries began to support ISO15022 messages, starting with the inaugural version of the Real-Time Trade Messaging (RTTM) system for fixed income securities. DTCC’s adoption of standards gained momentum with the industry’s push for straight-through processing, which acquired a new sense of urgency post-9/11 when the industry and regulators prioritized accelerating the trade cycle to strengthen business continuity.


Now, a decade later, almost all DTCC systems and services support industry-standard messages. For instance, today more than 99% of the volume handled by Fixed Income Clearing Corporation (FICC) is processed in real time using ISO standards. “Once customers had the necessary infrastructure in place, FICC’s implementation of ISO-compliant systems and products became faster, simpler and cheaper,” said Palatnick.


Product development followed a similar path. In 2003, DTCC rolled out Deriv/SERV, a new service for the over-the-counter derivatives market, with the FpML (Financial products Markup Language) standard, and cooperated with the industry to develop messaging. In 2008, DTCC again used FpML to build its Loan/SERV platform for the global syndicated loan market, working with U.S. and European industry associations to develop standard messaging for this sector.


In 2008, DTCC announced it would implement ISO message standards to expand access to its Alternative Investment Products (AIP) suite of services.

Updating the legacy

DTCC also is working throughout the enterprise to drive its legacy systems and products to industry standards. For example, in 2007, The Depository Trust Company’s (DTC) settlement engine began making the ISO 15022 standard available for settlement-related transactions.


Getting to Standard Operating


DTCC subsidiaries built their legacy systems more than 30 years ago using proprietary messaging formats that allowed customers to submit batch files and output, both print-image file reports and machine-readable output (MRO).


By the mid-1990s, however, the financial services industry was increasingly relying on two different messaging platforms. Many broker/dealers were using the Financial Information eXchange (FIX) protocol for pre-trade messaging and trade execution between the buy- and sellside. And on the settlement side of the equation, the global clearing and settlement banks adopted International Organization for Standardization (ISO) standards and incorporated securities messages into those standards to support moving money and securities among the settlement organizations.


“The industry was leveraging these two messaging protocols, and taking steps to link them, in order to extend straight-through processing [STP] across the transaction processing chain through to settlement,” said Rob Palatnick, DTCC managing director, IT Architecture Office. “It made sense for DTCC to move in the same direction, relinquishing its reliance on proprietary standards in favor of the ISO standards the industry was embracing. In addition to benefiting our customers, messaging standards are helping DTCC achieve consistency across all its systems and services.”


In equities clearing, National Securities Clearing Corporation (NSCC) is redesigning its trade capture platform with a new system called Universal Trade Capture that will introduce a standardized input record from all marketplaces and standardized real-time, message-based output to participants. Output will be available in the industry standard Financial Information eXchange (FIX), as well as in legacy formats.


In the insurance sector, DTCC systems support the ACORD standard for the Insurance & Retirement Services business. And in Europe, DTCC launched in 2008 its European subsidiary, EuroCCP, using ISO standards to transmit settlement obligations to its settlement agent.


In Asset Services, DTCC is migrating to the new ISO 20022 corporate action message types that support the entire lifecycle of a corporate action event. Starting with event announcement messages, DTCC plans to offer ISO 20022 messages in 2011, building towards a complete suite of corporate action messages during 2013.


Seat at the standards table

To ensure an enterprise-wide focus on standards, DTCC has an internal Messaging Standards Council that has developed a standards policy and catalogues standards used across the organization.


“The council includes members from all of our product areas, who share ideas and industry developments to ensure we formulate solutions that leverage internationally recognized protocols and messages,” said Palatnick.


DTCC also works with the industry to influence the development of standards through its involvement with ISITC’s North America Market Practice working group (ISITC is the International Securities Association for Institutional Trade Communication) and the global Securities Market Practice Group (SMPG).


As part of the effort to migrate to the ISO 20022 standard for corporate actions, DTCC is taking a lead role in expanding the use of ISO 20022 into other fields where ISO standards are not yet defined. For example, DTCC is collaborating with SWIFT and XBRL US to integrate ISO 20022 corporate action announcement messaging standards within a new XBRL corporate action taxonomy. (SWIFT is the registration authority for ISO.)


By bringing together XBRL and ISO standards, XBRL tagging tools can be developed that will enable companies announcing a corporate action (such as a merger or tender offer) to tag a prospectus (or other material) with key information that can be electronically consumed by recipients in an ISO 20022 message format.


“Communications standards give the industry a common framework for the expansion of financial services globally,” said Palatnick. “They ensure the same language is spoken across the transaction chain, which ultimately delivers greater efficiency, transparency and certainty to all parties.” @


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