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ISO20022 for securities, (why) do we have to ?

David Ramakers

David Ramakers

5 min read

In details

We all remember the revolution of migrating from ISO 7775 to 15022 MT standards, and how STP rates flew from 60–70% to our current 95-ish. Creating network and message validations kind of did the trick we think, more information became mandatory and it was all based on a dictionary. The investment of changing back office systems was returned exponentially in the reduction of operating costs.

The investment to ISO 20022 will therefore cause lots of institutions to carry huge legacy systems when trying to move to the new standards, and today settlement & reconciliation MT’s are in no urgent need of updates, are they? Although T2S only speaks in XML, the majority of intermediaries, even CSD1’s as references, still accept legacy messaging for T2S markets. So why bother investing in a fancy new way of communication when the current standards are still highly operational?

It’s working for payments isn’t it?

Kind of, indeed. ISO20022 is the standard for SEPA transactions, but still, lots Financial Institutions are translating their XML’s to e.g. MT103 for their correspondents who are not using ISO20022 yet. And let’s not forget the securities business is far more granulated and the legacy systems will still have to be supported for other players which means standards will at least have to co-exist.

Won’t you run out of support for MT?

Eventually, yes. In the MWG2’s it has become a standard issue to discuss change requests on the need of development in MT as it is generally accepted for XML (only). And some functionalities already exist in ISO20022 exclusively, e.g. proxy voting in asset servicing.

Moreover, in the regulatory evolution, interoperability between transactional data and reporting will become a must. ISO 20022 will fit in perfectly when it comes to having your business data models comply with reporting obligations, as some reports will need to be in XML format, e.g. CRS.

So, hurry up then?

No rush yet, but surely start and plan your migration, as by the end of 2022 the largest players will have ISO20022 installed and will not put their foot down anymore for thorough MT support, though it will remain a legacy service.

SWIFT has launched a full scale community consultation on ISO 20022 migration and based on the response they scheduled the start of the migration for November 2021 for cross-border payments (MT categories 1,2 and 9). There will be a co-existence period of 4 years where SWIFT will provide a shared service to translate between ISO20022 and MT standards. For ISO15022 securities messaging (MT cat. 5 messages) the SWIFT board recommended an ISO20022 capability for cross-border securities flows on an opt-in basis, but does not propose to set an end date for MT.

A SWIFT board information paper with further details of the migration strategy will be provided to the community in December 2018.

How hard can it be?

A full migration of ISO 20022 into every business area is quite extensive over complicated. Basically, today lots of MI3‘s just translate their internal communication into XML, mapping ‘:tag:value’ to eXtensible Mark-up Language. Which works fine and looks quite cheap but you’re not using ISO20022 to its full extent that way and it’s a rather short-term investment which on the other hand is the expensive type if you ask me. If you want to fully benefit from all ISO20022 features, back office systems — and not just the middleware — should speak a language which is capable of all XML components and elements.

This article made you think?

Don’t hesitate to contact DynaFin to see how we can assist in your quest for ISO 20022 integration.


(1) CSD: Central Securities Depository
(2) MWG: Maintenance Working Group 
(3) MI: Market Infrastructure

David Ramakers

David Ramakers