Funds APAC

A SWIFT perspective

October 2015

Alexandre Kech

Head of Securities Markets, APAC @ SWIFT

SWIFT Funds Ecosystem – an ISO 20022 world

Institutional investors

Investors’ intermediary

Distributor

Transfer Agent Fund accounting

agent

End investors

Cash agents

Distributor-side Cash agents

Fund -side

Other intermediaries &

platforms Portfolio managers

(I)CSD (when applicable)

Order placement (core

fund business)

Price report

Settlement

Payments

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3

Funds migration background & status

ER1087 (June 2011), IR586 (Dec 2011), IR637 (Feb 2013), IR 695 (March 2015)

Background

Not migrated but MX ready

18%

Fully migrated 66%

Not migrated nor ready

16%

MX traffic where both counterparties are live on MX

MT traffic, where both counterparties are MX-ready, but still using MT messages

MT traffic, where one counterparty is still not yet MX ready (and pair is still using MT messages).

June 2014 -> December 2014 Although migration progressing, number of pairs to be migrated is still too high => SSC and Funds Migration Advisory Group (FMAG) suggested way forward.

January 2015 New pricing scheme approved by PBTF and intermediary statements available to the community.

March 2015 IR 695 to SSC and NMGs, + mailings to the entire community - inform on FMAG final recommendations and migration date adaptation.

4

CUG Deadline

• Migration must have a deadline to keep the market moving.

• ‘Relative’ deadline has been set to first getting to 90% MX traffic fully migrated

• Once that threshold is reached, the CUG to be maintained for a max of two years

• One exception: receiver-only (will be maintained in CUG even after migration completed)

Pricing Policy

• MT pricing should be less attractive than MX

• MT CUG should be premium priced to all CUG users, but should not penalize users that have already made the MX investment.

• Revised disincentives measures are therefore applied since end of August 2015 (see next slide for details)

• Communicated to the community via NMGs and dedicated mailings in March 2015, reminder sent in August 2015

FMAG measures implemented

Removal of “change freeze”

• Change freeze on funds orders (MT and MX) is scheduled to be removed in November 2015 as planned

• However, impact of future maintenance on the community will be kept to a minimum

• SWIFT working with appropriate groups (such as SMPG and SEG) to reintroduce smooth maintenance of these messages

Admission policy

• Existing MT traffic will be retained in FIN CUG post-November 2015

• CUG will not be open to everyone => new entrants only allowed under specific conditions

• Automation

• Straight through Processing (STP)

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Trends in automation & standardisation

How has funds processing evolved

Ensuring

Scalability

• Establish market practice

• Agree on common language

• Central processing venue (usually MI)

• Common communication protocol

Opening

distribution

• Agree on common best practices

• Adoption of ISO standards

• Use standard network, international highway

• Facilitate distribution via platforms

Distributing

X-border

Evolu

tion /

Tim

e

Fund passporting

Countries involved

PRC-HK Mutual

Recognition

Asean fund passport

initiative

APEC Asia Region Fund

Passport (ARFP)

HK SG

AU

KR

TH

MY

CN

(SG)

NZ

TH

PH

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Potential models between countries

One to one

One to many

Many to many

Country A Country B

Country A Country B

Country A Country B

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Fund Platforms

Drive by market infrastructures

TAIWAN

HONG KONG

KOREA

AUSTRALIA**

CHINA

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LIVE

SINGAPORE

INDONESIA (doing)

VIETNAM (doing)

MALAYSIA

*

* Indirect SWIFT adoption via service providers

THINKING (Implementing)

Domestic X-Border

ISO 20022

ISO 20022

ISO*

Network Standard

** ASX has launched fund platform but market remains bilateral on ISO

Trailer

Fees

Asset

Servicing Transfer

Settle /

Pay Reconcile Order Transform

Account

Opening

Platforms functional processing coverage

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Distribution

Agreements

FundSettle, Vestima Outsourced Outsourced

KSD

HKMA Outsourced Outsourced

TDCC Outsourced *

* Indirect SWIFT adoption via service providers

Covered by ISO 20022

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CSD

Domestic Transfer agent /

fund administrator

Domestic Institutional

investor

CSD funds hub communication ecosystem

Execution

X-border* Transfer agent /

fund administrator

Execution

X-border* Institutional

investor

* X-border = UCITS funds or European investors or intra-regional traffic from/to ASEAN or extended Asia

** Direct = send order directly to transfer agent while Indirect = use of intermediary hub/platform

Direct vs

Indirect**

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Launched by

Korean Securities

Depository

Members:

- CSDs playing (or

wanting to play) a

role in Funds

processing

- Advisers

Comparative

analysis of

participating fund

markets, incl. study

about current

CSD's fund services

with member CSDs

Development of

harmonised post-

trade operations for

fund processing in

Asia

Asia Funds Standardisation Forum

Launched at the

next Asia Pacific

CSD Group meeting

in Taipei on

November 4th

www.swift.com

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