2014 annual business report

CRAFTING THE VISION FOR THE SECURITIES INDUSTRY
2014 ANNUAL BUSINESS REPORT
About ISITC
PARTICIPATING ORGANIZATIONS
ISITC is comprised of more than 100 member firms,
drawn from the broker/dealer, global custodian,
investment management, vendor and utility
communities. Membership allows any number of
individual representatives from each firm to participate
in the various ISITC activities, Industry Forums, Working
Groups, events and conferences. More than 1,500
individuals are currently registered under their
respective firms as members of ISITC.
AFFILIATIONS
ISITC has worldwide affiliates to add to its global
presence and perspective. ISITC Europe and Japan are
active in their respective markets.These organizations
work together with ISITC North America on issues
affecting the global marketplace.
BOARD OF DIRECTORS
The Board of Directors is responsible for managing the
business and affairs of the organization.It is comprised
of 15 General Members (custodian banks, broker/
dealers and investment management firms) and five
Associate Members (vendor and utility communities).
STEERING COMMITTEE
Every ISITC member firm has a designated Steering
Committee representative acting as liaison between
the member firm and ISITC. This individual
communicates information from the Board of Directors
to the member firm and is the member firm’s
designated voting representative at ISITC.
QUARTERLY MEETINGS
The organization meets four times a year to address
key industry initiatives, participate in Working Group
sessions and network. One-Day events are also
sponsored. Additionally Working Groups meet via
conference calls between the meetings.
Recent Activities in the
Financial Industry
The primary focus for ISITC has been to define U.S.
Market Practices around settlements, reconciliation, and
corporate actions messages along with collaboration
with other organizations to address key issues impacting
the industry. Below are some highlights from 2014:
1. ISITC defined Strategic Goals for Leadership;
Membership; Content.
2. ISITC launched new Middle Office Working Group.
3. The ISITC Regulatory Working Group members
participated in SIFMA industry forums, Global LEI
working groups and the Financial Information Forum
to provide feedback and progress on the key LEI and
FATCA regulatory initiatives.
4. ISITC continued to work closely with DTCC on
implementing DTCC’s corporate actions transformation
initiative.
5. ISITC released a new market practice for Cleared
Derivatives Communications.
6. ISITC, AMF, ISDA and SMPG collaborated on a
Tri-party Collateral Segregation Market Practice.
7. ISITC, Omgeo and FPL continue to develop the new
Standing Settlement Instruction messages.
8. ISITC, together with other Standards Coordination
Group representatives from SWIFT, FPL, ISDA and
XBRL are extending the Roadmap to recognize key
needs of Regulatory bodies.
9. ISITC continued to participate directly in the governance of ISO 20022 via the RMG and the SEGs.
10. ISITC represented the US at the annual SWIFT
Maintenance Working Group meetings .
11. Formalized two new Subgroups within the
Investment Manager Forum around Dividend and
Income and Fail trade tracking.
12. ISITC Working Groups finalized/updated the following
market practices:
• Reconciliation: Statement of Holdings
• Derivatives
• Corporate Actions
• Settlements
• Securities Lending
FOR ADDITIONAL INFORMATION VISIT
www.isitc.org
ISITC, 390 Amwell Road, Suite 402, Hillsborough, NJ 08844
Phone +1 (908) 359-1184 Fax +1 (908) 359-7619 E-mail [email protected]
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2014 ANNUAL BUSINESS REPORT
WOR KING GR O UPS
CORPORATE ACTIONS
DERIVATIVES
MISSION STATEMENT
MISSION STATEMENT
The mission of the Corporate Actions Working Group is to
examine business processes throughout the life cycle of a
corporate action. Our goal is to define standards for the U.S.
market and examine variances with global market practice for
the purpose of harmonizing corporate action messaging
standards and move toward increasing automation and
achieving greater STP throughout the industry. The working
group recommends enhancements/modifications to the ISO
corporate action message standards to ensure they meet the
needs of the market. The working group is also the forum for
discussing and recommending enhancements to business
processes and collaborating with other industry groups in
addressing new business processes within corporate actions.
The mission of the Derivatives Working Group is to work in
conjunction with the AMF and other industry groups to create
market practice standards around derivatives processing,
focusing on trade notification, reconciliation, collateral
movements, and interest payments (resets).
2014 ACCOMPLISHMENTS
• Completed work in the Redemption Sub Group and
established market practice for Lottery Events in the US
Market which focuses on the business process
• Published market practice in My Standards on Corporate
Action Notification Messages for the following events: Cash
Dividend, Lottery, Full Call, and Dutch Auction
• Partnered with DTCC on 6 business cases for SR2015 to
enhance the CA messages which were approved by the
Maintenance Working Group
• Published updated ISITC Corporate Actions Market Practice
Document in November 2014 which included updates to
align with SR2014 and Lottery Events
2015 GOALS
• Maintain updates to Market Practice Documentation to
ensure guidelines are current to account for any material
changes
• Examine Corporate Action business process throughout the
lifecycle of an event to define US Market Practice and strive
to harmonize global Corporate Action messaging standards
• Publish market practice in My Standards for Corporate
Actions on the full lifecycle of messages for the following
events: Cash Dividend, Lottery, Full Call, and Dutch
Auction Events
• Collaborate with other Industry Groups to enhance the
Corporate Action business process
• Track and respond to open issues/questions raised by
Working Group members and other industry groups
2014 ACCOMPLISHMENTS
• Conducted formal presentations on Dodd-Frank as it
relates to OTC derivatives
• Provided regular updates on other groups such as SWIFTNet FpML, FpML IM custodian working group, and the
SIFMA working group
• Partnered with Settlements WG to provide participant
flows and examples for NDF FX Forwards for Clearing MP
• Refined Cleared OTC MP to clarify participants and define
counterparty
• Kicked off addition of Equity Index TRS to Bilateral
OTC MP
• Provided updates to SIFMA on ISITC Market Practice
Initiatives and collaborated on the formation of a new
sub-group to document data consistency in the cleared
OTC space among FCMs, SEFs, CCPs, etc.
2015 GOALS
• Continue Education and collaboration with other industry
groups on Dodd-Frank, Central Clearing and various
industry initiatives around derivatives
• Continue enhancements to Bilateral OTC Market practice
for additional products; finalize Equity Index TRS
• Continue enhancements to the Cleared OTC market
practice business cases
• Create a best practice document for porting of listed and
cleared OTC between clearing brokers
• Monitor roll out of NDF FX Forwards clearing and edit MP
with Settlements as appropriate
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2014 ANNUAL BUSINESS REPORT
MIDDLE OFFICE
RECONCILIATION
MISSION STATEMENT
MISSION STATEMENT
The mission of the Middle Office Working Group is to provide
a forum for participants responsible for the post-execution and
pre-settlement functions at their firms to discuss common
issues, business process requirements and best practice
initiatives. These functions include trade allocation, trade
confirmation and related processes surrounding the
pre-settlement trade lifecycle.The group will endeavor to unite
the middle office community and continue the path towards
standardized straight-through processing.
The mission of the Reconciliation Working Group is to provide
market practice recommendations on existing and potential
issues for all messages that facilitate the cash and securities
reconciliation process.
2014 ACCOMPLISHMENTS
• Formed the new WG group and launched it with the
election of four co-chairs
• Achieved increased participation from the Broker/Dealer
community; March Vendor Show panel with four brokers
• Championed the T+2 initiative, suggesting and delivering
best practices to the ISITC community
• Began to explore and develop the ‘Place of Settlement’
discussion with a view to recommending best practices
surrounding this topic in 2015
• Provided technology/initiative updates; e.g., Omgeo
products (Alert exception process and Global Custodian
Direct)
• Held multiple press interviews promoting ISITC and giving
commentary on hot topics; (e.g.,T+2
• Invited to deliver a presentation at an Asset Manager forum
event surrounding T+2
2015 GOALS
• Increase membership and involvement in the Middle Office
Working Group, particularly from the Broker community,
with a goal of adding at least 2 new broker members
• Educate and formulate best practices surrounding the trade
allocation and matching process; e.g., via different
technologies/methodologies,place of settlement matching
• Ensure rotation of roles and responsibilities within the
MOWG Co-Chair team to build the bench for the future
• Engage and partner where possible with other ISITC groups
to understand ‘hot topics’ from an industry and regulatory
perspective; e.g. IM, Custodian, Regulatory groups
• Where appropriate, engage with outside organizations to
gain a broader perspective of the operations landscape such
as AMF, FIX, Omgeo
2014 ACCOMPLISHMENTS
• Continued to work with Investment Manager Forum on
alignment with AMF documentation/guidelines to ensure
consistency in data elements for failed trade reason codes
and frequency of reporting
• Updated Accounting Statement of Holdings Market Practice
• Updated Cash Reporting Market Practices to consolidate
MT940 and MT950 into one document
• Worked with Options Clearing Corp (OCC) to confirm
method to report Cash Collateral using existing messages;
identified message changes needed for reporting of
Securities Collateral
• Submitted / contributed to three 2015 SWIFT Change
Requests, all related to Collateral reporting
2015 GOALS
• Assess Intraday vs. End-of-Day reporting for Securities and
Cash and develop a MP for delta reporting, as a result
of shortened settlement cycles and intraday cash reporting
requirements
• Perform gap analysis between ISITC and SMPG market
practices for Custody Statement of Holdings
• Complete the Market Practice for Total Portfolio Value
message
• Finalize analysis/recommendation for Tri-Party Collateral and
Exposure Statement
• Create a globally acceptable ISO standard for failed trade
reporting (assuming a “statement” message such as MT537
is part of the standard)
• Assess optional reporting of Place of Safekeeping and
standardize how it is to be reported on Holdings Statements
• Assess business cases for SR 2016 submissions
• Facilitate market changes/requirements associated with
CiCi/LEI, as needed
• Reinvigorate the Working Group conference calls and
facilitate conversations among firms that focus on best
practices which will inform potential changes to market
practice / standards changes
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2014 ANNUAL BUSINESS REPORT
REFERENCE DATA AND STANDARDS
REGULATORY
MISSION STATEMENT
MISSION STATEMENT
The mission of the Reference Data and Standards Working
Group is to advance critical discussion on issues impacting
financial instrument and market participant reference data
within the trade lifecycle and works with other industry groups
and participants in developing and promoting market practice
standards.
The mission of the Regulatory Working Group is to increase
understanding of new regulations across our constituency and
partner with regulators and industry standards organizations
to define best practices.
2014 ACCOMPLISHMENTS
• Multi-Listed Securities Best Practice: Improved and
produced an updated best practice
• ISO 20022 SSI Message Design: Finalized the Message
Definition Report
• Classification of Financial Instruments (CFI): Presented
multiple updates on the challenges and progress of the ISO
TC68/SC4/WG6 CFI and X9D CFI Mirror Group studies
• Legal Entity Identifier (LEI): Coordinated multiple updates
from vendor utilities
• Several vendor presentations on new technology offerings
related to standards initiatives.
2015 GOALS
• Multi-Listed Securities Best Practice: Submit revised Best
Practice for industry review by end Q1 2014
• ISO 20022 SSI Messages: Confirm ISO ratification of new
SSI messages and initiate community rollout and support
program
• Classification of Financial Instruments (CFI): Continue to
submit ISITC feedback to WG6 and X9D. Coordinate and
support U.S. ratification of final document through X9.
• Legal Entity Identifier (LEI):Monitor LEI Regulatory Oversight
Committee (ROC) actions and prepare/initiate community
data integration plan and schedule
• Vendor presentations on new technology offerings:
Continue insight programs to educate ISITC member firms
on new technology offerings while maintaining our vendor
agnostic principles
• ISITC File Transmission Guide: Initiate work on updating the
ISITC File Transmission Guide to include ISO20022 and FpML
messaging standards
• Standardized File Transfer Security Layers: Explore the
need to standardize file transfer security layers: Secured
Connectivity; Digital Signatures; Non-Repudiation
2014 ACCOMPLISHMENTS
• Legal Entity Identifier (LEI): Participated in both Securities
Industry and Financial Markets Association (SIFMA) and
Financial Stability Board (FSB) working groups; provided
feedback on the development of the LEI Global Governance
Process, Operational considerations and Data Model/
attribute level evaluation
• Foreign Account Tax Compliance Act (FATCA): Delivered
ongoing updates on the status of FATCA implementation;
took part in other industry tax groups, including Financial
Information Forum (FIF)
• Financial Transaction Tax (FTT): Documented status and
open issues with the adoption of the French Transaction Tax
and then Italian Transaction Tax,along with their exemption
structures and impact to messaging standards
• Regulatory Speakers: Hosted a number of speakers on
critical topics and engaged closely with other groups on
issues that reached across working and industry groups
2015 GOALS
• Continue to actively monitor, present and post all relevant
updates affecting the LEI global implementation efforts
and establishment of the Global Legal Entity Identifier
Foundation (GLEIF)
• Identify, document and communicate evolving tax
implications including Cost Basis,FATCA and the soon-to-be
expanded global effort (GATCA) , as well as FTT across
additional EU countries
• Research and review ongoing impacts to firms’ regulatory
implementation considerations, including BCBS 239, and
related processing impacts
• Collaborate with industry working groups including SIFMA,
Enterprise Data Management (EDM) Council, and FIF to
enhance knowledge and provide appropriate feedback
• Engage with other ISITC working groups in assessing the
potential impact to messaging standards and responding
to open questions raised by other Working Group members
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2014 ANNUAL BUSINESS REPORT
SECURITIES LENDING
SETTLEMENTS
MISSION STATEMENT
MISSION STATEMENT
The mission of the Securities Lending Working Group is to
establish comprehensive market practice standards for all
securities lending related activity.
The mission of the Settlements Working Group is to define best
practices for the communication of settlement instructions and
confirmation messages for all securities-related financial
instrument types; third party and bank for foreign exchange
transactions; collateral messaging and currency movements.
This group works collaboratively with other industry and ISITC
working groups.
2014 ACCOMPLISHMENTS
• Euro wide Financial Transaction Tax: Monitored rollout of
regulations for possible 2016 / 2017 implementation –
Lending and Borrowing transactions are in-scope as a
taxable event
• Italian Financial Transaction Tax: Highlighted Annual
reporting requirements due 3/31/14
• Fed Reallocation: Reconfirmed that block qualifiers are not
used; agreed that executing and clearing broker should
remain as the Custodian as per Market Practice; and agreed
that the Market Practice will not be updated to require use
of the contra account
• Support for T+2: Agreed that there are no messaging
requirements nor Market Practice changes required but
expect a higher potential for fails as the Borrower has less
time to source the security to return
• ISO 20022: Worked with the Settlement WG to review
and ensure that 20022 messages contain the equivalent
identifiers and code words specific to lending transaction
• MT535 – use of LORE / LODE: Confirmed usage of the tags
• FED – distinguish Lending transactions & tie Collateral back
to the Loan: Require further discussion with SMEs
2015 GOALS
• Be available as Subject Matter Experts to other Working
Groups as the need arises
• Monitor impacts to Securities Lending resulting from
updates to the Financial Transaction Tax regulations
2014 ACCOMPLISHMENTS
• Documented and reviewed SWIFT SR2014 impacts
• Assessed SR 2015 submissions to ensure they represented
valid business reasons
• Continued collaboration with SMPG to make recommendations
around MyStandards usage
• Served as Settlements & Reconciliations (SnR) representative
for US National Group at SMPG Conferences
• Continued active AMF / SIFMA working group participation
& support
• Finalized/Updated Market Practices:
– ISITC US Settlements & Confirmation Market Practice
updated (finalized)
– ISITC Bank Loan Market Practice completed (finalized)
– ISITC Cleared Non-Deliverable Forwards Market Practice
completed (pending finalization)
– ISITC/SMPG Bi-lateral Repo consolidation drafted (under
review)
– ISITC Tri-party Repo Market Practice update drafted (under
review)
– SMPG Segregated Cash and Security Collateral Market
Practice updated (in progress)
– SMPG Status Processing Market Practice drafted (in
progress)
• Drafted SMPG Securities Related Payments Market Practice
(in progress)
2015 GOALS
• SR 2016 Submissions: Assess business cases for SR 2016
submissions to ensure they represent valid business reasons
• Finalize SMPG Global Bi-lateral Repo MP
• Finalize SMPG Settlement Status MP
• Finalize ISITC Tri-Party Repo MP
• Finalize SMPG Segregated Cash and Security Collateral MP
• Finalize SMPG Securities Related Payments MP
• Security Finance MX: Further discussions on impact to
decoupling contract and collateral from the same message.
Reach decisions based on existing pain points on how best
to address in the MX version
• Represent US National Group for SnR at SMPG conferences
• Re-launch ISITC Payments Sub-Group to address open
payments-related action items
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2014 ANNUAL BUSINESS REPORT
FO RUMS
CUSTODIAN FORUM
INVESTMENT MANAGER FORUM
MISSION STATEMENT
MISSION STATEMENT
The mission of the Custodian Industry Forum is to provide
common approaches to identifying and resolving custodian
bank issues, and to recommend and implement solutions with
other ISITC and industry participants with the ultimate goal of
achieving STP.We interact with the other constituency forums
to educate institutions on the issues impacting global custodians
and to achieve the most effective solutions to commonly
acknowledged goals.
The mission of the Investment Manager Forum seeks to provide
common approaches to identifying and resolving investment
manager issues; to recommend and implement solutions with
other ISITC participants with the ultimate goal of achieving
Straight through Processing (STP); and to interact with the other
forums to achieve the most effective solutions to commonly
acknowledged goals.
2014 ACCOMPLISHMENTS
2014 ACCOMPLISHMENTS
• Arranged for external and internal parties to present on key
topics impacting our firms and business partners:
DTCC Settlement Matching, MMI Optimization, Dematerialization, Shortened Settlement Cycle, Corporate Action,
Collateral, Customer Reference and Documentation
• Provided updates on Omgeo SSI Utility
• Fed $50 million survey
• Participated in joint forums with the other Industry
Working groups (Investment Managers and Broker Dealers)
to discuss:
– Challenges and Best Practice Associated with client
on-boarding
– Fail Trade Reporting and Dividend
– Income Claim Initiatives
• Educated and dialogued with our constituency on:
– Change to DTCC RAD effective July 2014
– AMF Initiatives
– Roundtable on Education, Current Events and Pain Points
2015 GOALS
• Continue to educate our constituency on time sensitive
and relevant topics.
• Continue to work on best practice associated with
On-boarding.
• Achieved consistent participation from Investment Manager
constituents on monthly IM calls which resulted in continuous
sharing of best practices
• Established two Investment Operations roundtable
discussions this year with member and non-member
constituents to openly discuss topics of interest and share
best practices
• Arranged for external and internal parties to present on key
relevant topics impacting our firms and business partners
• Developed Dividend and Income sub-group that resulted in
a documented best practice
• Shared Trade Fail Management survey results and developed
a sub-group for the discussion on failed trade reporting
• Deepened partnership with custodian community
demonstrated by several Joint Sessions this year
2015 GOALS
• Increase IM Forum engagement in developing deeper
partnerships with broker and custodian communities to
solve relevant issues
• Expand IM participation and continue commitment to
regular Investment Operation roundtable discussions.
Opportunity to partner across firms to address challenges
and help set prioritization for common vendor platform
development. Potential to reach non-participating firms to
increase ISITC membership
• Increase Working Group co-chair participation in IM Forum
in an effort to raise awareness of ongoing initiatives and firm
priorities
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2014 ANNUAL BUSINESS REPORT
VENDOR FORUM
MARKETING COMMITTEE
MISSION STATEMENT
MISSION STATEMENT
The Vendor Industry Forum is responsible for identifying,
planning, and disseminating securities industry issues that
can be addressed with vendor-based solutions.
The mission of the Marketing Committee is to plan, promote
and execute events that keep the ISITC membership informed
and make an impact on the securities industry. This includes
developing and organizing conferences, discussion forums,
workshops, seminars and on-going public relations initiatives.
2014 ACCOMPLISHMENTS
• Organized and conducted successful March 2014 Vendor
Show.Total Exhibitors 24, and 13 Sponsors
• Survey results of the March Conference revealed positive
feedback
• The Raffle prizes were well received and greatly appreciated
• The Vendor Group met regularly and created a list of
potential speakers and topics which helped the Marketing
Group in developing both content and good speakers for
the quarterly meetings
• At the June event, the Vendor Group received positive
feedback on requirements for topics and industry trends.
This contributed in recommending interesting topics and
potential speakers for the September and December event
2015 GOALS
• Target additional Exhibitors for the Vendor Conference
scheduled on March 22-25
• Contribute to the creation of an interesting program to
improve attendance at the Vendor Conference
• Target additional members/member firms
• Continue to support the marketing efforts
• Continue to add value by suggesting topics on industry
trends, provide solutions to industry challenges and
continue to leverage the successes of 2014
2014 ACCOMPLISHMENTS
• Organized and conducted successful March 2014 Vendor
Show
• Conference attendance from 2013 to 2014 remains strong
• Continued to enhanced Attendee Survey Questionnaire
• Public Relations & Promotions: 7 interviews held; 76 pieces
of coverage in over 20 different media outlets; 6 press
release distributed; 2 placed articles published
• Special thanks once again to PMA and Cognito for all their
support in 2014!
2015 GOALS
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Target additional vendors for the March 2015 show
Target additional members/member firms
Continue contract with Cognito
Continue to market the ISITC brand through press releases
and briefings
Continue cross-promotions with like-minded organizations
Continue to leverage existing marketing efforts
Continue to support Membership Committee in their
expansion efforts
In general, continue to leverage the successes of 2014,
applying lessons learned from activities and attendee
feedback