SWIFT has released a new report on the state of adoption of the ISO 20022 financial messaging standard among Asia Pacific securities market infrastructures.
ISO 20022 was established as a common business language to streamline communications, improve payment efficiency and promote interoperability for the financial world. SWIFT is the registration authority for the standard.
According to the report, the early adopters of ISO 20022 were in the fund industry, due to the influence of UCITS and the need for standardized messaging for cross-border fund orders.
SWIFT notes that fund market infrastructures including the HKMA (Hong Kong Monetary Authority), KSD (Korea Securities Depository) and TDCC (Taiwan Depository and Clearing Corporation) implemented ISO 20022 for connecting to CSDs (central securities depositories), transfer agents and global fund platforms like Euroclear’s FundSettle and Clearstream’s Vestima.
Nine years since ISO 20022 was first intruded for securities, 27 securities market infrastructures are live on the standard around the world. Nine of these are in Asia Pacific, with four more coming online in the next 3-5 years, including HKEX (Hong Kong Exchanges and Clearing), ASX (Australian Securities Exchange), BOT (Bank of Thailand) and KSEI (Indonesia’s CSD, PT Kustodian Sentral Efek).
The report notes that JASDEC (Japan Securities Depository Center) was the first to adopt ISO 20022 in clearing and settlement in 2014, citing a desire to rationalise multiple proprietary formats across different business lines and enrich service functionality as key motivations for the migration.
SGX (Singapore Exchange) followed in 2016 with a post-trade refresh (Phase 1) on ISO 20022, in a bid to provide flexibility to participants in terms of their choice of back office systems and adopt international standards and best practices. Phase 2 went live in December 2018.
Indeed, a desire to adopt international standards and best practice was cited by 88% of respondents in a SWIFT questionnaire last year as a key motivation to adopting ISO 20022, only after the desire to achieve greater straight-through processing – which was cited by 100% of respondents.
Other key motivations for adopting the standard were to introduce more integration options with global vendors, meet enriched data requirements, and reduce costs.
The questionnaire also revealed that 80% of ISO 20022 adopters said their cost-benefit analysis of the migration was positive. Some of the key benefits to adoption included straight-through processing, increased operational efficiency, reduced risk and cost, and better structured data elements and standards, among others.
Given the ability of ISO 20022 to streamline siloed data and enable easier mapping across different data elements, the standard has also started to be explored for adoption in conjunction with emerging technologies such as DLT (distributed ledger technology) and APIs (application programming interfaces).
“With almost ten Asia-Pacific Securities Market Infrastructures already live on ISO 20022, and with at least four more in the pipeline, the standard looks to have arrived in the region,” the report says. “As more CSDs adopt it for their post-trade settlement and reconciliation processes, ISO 20022 volumes are also expected to grow in the region.”
“This is bolstered by the fact that the ISO 20022-readiness for securities transactions has now reached a high of almost 500 financial institutions.”
The report provides insights into implementation models, lessons learnt from past projects and best practices to aid in ISO 20022 adoption by other market infrastructures and financial institutions.
The full report is available here (download).