T2S OnLine - Quarterly review - No 11, Winter 2012

1 March 2012

Double interview with the T2S Network Service Providers

The first T2S milestone of 2012 was the announcement that the Eurosystem had selected the two providers of value-added network connectivity services for T2S: SWIFT and a consortium composed of SIA and Colt. What was your main motivation in submitting a tender and becoming a T2S Network Service Provider?

Harry Newman: SWIFT’s global messaging and connectivity business has its roots in Europe, where we are the leading provider of connectivity for financial institutions and market infrastructures. Overseen by the G-10 central banks, we have worked closely with the European System of Central Banks since SWIFT was founded, and we provide services to all banks in the system and to TARGET2. Additionally, we have a strong and growing business with the CSDs, dealing with both cross-border and domestic flows. Over time our customers have invested in our connectivity and messaging infrastructure, and, as their cooperative, SWIFT’s mission is to ensure that its customers get the most out of their investment. For these reasons, we decided to participate in this tender.

Hugh Cumberland/Francesco Lanza: T2S is a key project for Europe. As SIA and Colt are established suppliers of value-added services to the European financial services industry, it made perfect sense for us to jointly broaden our portfolio capability. The European Central Bank has created the opportunity to remove barriers to securities cross-border real-time DVP settlement within Europe, but also to introduce competition in the areas of global messaging and connectivity. By introducing multiple T2S Value-Added Network Service Provider licences the clear intention is to achieve lower prices and increase efficiency. With over 20 years of experience in financial messaging and a European network reach second to none, SIA and Colt are taking up this challenge with a powerful and persuasive commercial proposition.

You have been chosen as you were the two providers that fulfilled all the technical and business criteria required for T2S, offering the best prices. The central banks, the CSDs and their customers who intend to access T2S via a value-added connection will be able to select one of you as their provider, and negotiate with you regarding the related terms and conditions (within the constraints set out in the Licence Agreement). What are your specific strengths? Which of your activities do you envisage helping you to attract customers to your T2S connectivity offer?

Harry Newman: SWIFT has a number of specific strengths. Our resilience, availability, security and data integrity are of the highest calibre. Our maximum pricing is the most economical. We have an excellent track record of managing technical platform migrations and significant expertise in securities market infrastructure initiatives. We also offer best-in-class customer support and end-to-end managed services, starting with the analysis of the market situation today, and progressing through implementation, testing and migration, all the way to live operations. We will enable our customers to maximise their investment in SWIFT by re-using it to access T2S, and we will support them by providing as many services as they need at the best price. In addition, SWIFT is unbeatable in its standards expertise, being the ISO 20022 registration authority.

Hugh Cumberland/Francesco Lanza: Colt delivers and supports best-in-class managed network and IT solutions for the pan-European financial services market, while SIA has an outstanding track record in payments, market access and messaging across Europe. The combination of our strenghts allows us to offer a fully managed, end-to-end service in every T2S country, which we think is both compelling and unique.

Our specific strengths in the T2S context are a peer-to-peer messaging system with total confidentiality, low latency and high scalability, a one-stop-shop approach that allows seamless integration, and an end-to-end contractual Service Level Agreement for real peace of mind, coupled with a total service availability in excess of 99.999%. We provide an extensive European network with 35,000 kilometres of wholly owned fibre optic cable in 21 countries, and with direct fibre connections in 18,000 buildings and 19 data centres. Our pan-European support model is multi-lingual and operates 24/7.

Our all-in-one price – progressively decreasing with volume – will result in the lowest overall total-cost-of-ownership for our customers.

Together with the expected CSD Regulation and other harmonisation initiatives in the field of securities settlement, T2S promises to bring about new opportunities and challenges in the industry. What are your expectations concerning the business opportunities opened up for you by T2S? More in general, how do you see your role in the project? And how can the Eurosystem help you to fulfil this role in a way that is beneficial to the T2S participants?

Harry Newman: Our view is that T2S will be a trigger for process harmonisation beyond settlement. We expect to see the standards and process flows used by T2S influencing the harmonisation of the post-trade environment all the way through to asset servicing processes. Harmonisation needs experts that can map processes into standards, and we feel that SWIFT has a key contribution to make here and could in fact lead that effort. We intend to offer our expertise in this area to our customers.

We see our role in the T2S project as that of providing the least complex and most efficient services to T2S participants, so that they are able to communicate with the new settlement platform as easily as possible. We will leverage our existing services in order to fulfil that role, and if we need to develop more services, we’ll do so. Achieving this will require collaboration with the Eurosystem and T2S participants.

Hugh Cumberland/Francesco Lanza: Being awarded the T2S Value-Added Network Service Provider licence underscores our joint credibility in the secure messaging space.

Our solution is standards-agnostic and independent of any specific syntax, and offers our customers a new paradigm in secure messaging – a decentralised, real-time, highly reliable connectivity platform addressing the front-to-back needs of all financial institutions. Our provenance is based on an unblemished track record of delivering mission-critical infrastructures such as MTS and EBA Step2. Our highly skilled staff specialise in all technology aspects of the securities trading and settlement value chain. Therefore the support we will provide for the T2S project will not be limited to cost efficiency, as we will also assist all the T2S participants as they re-engineer their business processes and develop value-added services.

2012 is an important year for the T2S project. In 2012, the CSDs that decide to join will enter into a contractual arrangement with the Eurosystem and start adapting their IT systems and processes to T2S. As regards the connectivity services, could you briefly illustrate the next steps you envisage taking in your preparation for T2S?

Harry Newman: 2012 is an important year for us too. We need to deliver all the elements as stipulated in the tender, the key ones being proof of concept and test environments. These will lay the foundations for T2S participant testing of the T2S platform.

There is a lot of information to digest in preparation for T2S. We will be setting up specific services for T2S participants to help them get ready. For example, we will offer services to help them to understand all the documentation, to understand how to set up the connectivity, and to understand the impact of the 20022 standards and the integration of these standards into back office systems.

We’ve had experience in customer migration to TARGET2 and other market infrastructures. We intend to leverage that to benefit our T2S customers.

Hugh Cumberland/Francesco Lanza: Having signed the contract with T2S we are now focusing on completing the proof of concept, and planning the delivery, testing, roll-out, support and maintenance of our T2S solution. This includes installing the network infrastructure inside T2S, and building our Data Exchange Protocol Integration platform to support our customers in integrating their IT infrastructure with T2S.

Beyond the Educational and Migration Kit we are launching our promotional campaign, so that we can reach out to our existing European customer base of more than 20,000 financial services organisations, as well as to those who are not yet customers. In due course, we will start to roll out our solution to the T2S “early adopters”.