Standardising the message: Collaboration, clarity and flexibility key to current and future success of global messaging standard
The Investment Roadmap, a guide created through a collaboration between the world’s leading messaging standards, to provide consistent and clear direction on messaging standards usage was released in May 2008. A year later, FPL’s Operations Director, Courtney Doyle asked the authors of the roadmap for their assessment of its impact on the industry and how they saw its future evolution.
Courtney Doyle: What was the motivation and purpose behind this Investment Roadmap collaboration?
Genevy Dimitrion (ISITC Chair): Today, Market Practice and Standards are inextricably linked and yet for all our efforts, Market Practice exists as a mere documented recommendation. However, we see convergence between the two areas to the point where market practice can be encapsulated directly into the standards themselves. The roadmap has a role to play in this evolution, and we see it as critical for the next generation of standards. It also helps to provide future users direction on which messaging standards should be used throughout the trade lifecycle.
Jamie Shay (Head of SWIFT Standards): Our involvement was driven by clear market demand from our customers. They needed clarity about which syntax to use in which space and, more importantly, they wanted a way to make these standards interoperable. SWIFT and FIX have been working together for a number of years towards a single business model in ISO 20022. The decision to work together on an Investment Roadmap was a natural progression. It provides clear direction with regard to messaging standards usage as it visually “maps” industry standards protocols, FIX, ISO and FpML, to the appropriate asset class and underlying business processes.
Karel Engelen (Director and Global Head Technology Solutions, ISDA): Similar to SWIFT, ISDA felt it was important to map out the coverage of each of the different standards so people could get a complete view of the industry standards at a glance. We also thought it would be a useful tool for determining where we had duplication of effort or functional gaps to complete.
Scott Atwell (FPL Global Steering Committee Co-Chair): As the others have pointed out, we needed to provide greater clarity as to how the various standards ‘fit together’. We sought an approach that recognizes, leverages, and includes the financial industry standards without reinventing and creating redundant messages that generate cost and confusion for the industry. The effort was named ‘Investment Roadmap’ as its founding purpose was to aid industry firms’ technology investment decision making.
Courtney Doyle: The roadmap was released over a year ago. Is the community referring to it and using it as a guide on how to invest in standards? How should firms use it and what does it mean for them?
Scott Atwell: FPL has found the roadmap useful as a tool for standards investment. However, the roadmap benefits are multifaceted. It has driven an even greater level of collaboration and cooperation amongst our standards organizations. Discussing it often serves as a ‘conversation starter’ that leads to healthy discussion and debate. It has also served to facilitate key changes to the ISO 20022 process such as the ability for FIX to feed the ISO 20022 business model and to be the recognized syntax for the Pre-Trade/Trade model.
Genevy Dimitrion: ISITC consistently refers to the roadmap when presenting to our members as the guidelines on message standards to be used within the trade lifecycle. It has become an extremely helpful tool for our members in understanding the key standards available and how and when they should be used.
Karel Engelen: The Finance domain has always been well represented in the standards arena, but too much choice is often confusing. The roadmap helps you navigate by showing the standards likely to become dominant in a particular space so that you can align your own system development strategy with them.
Jamie Shay: To add to the previous comments, I don’t think the community is referring to the map per se but they are benefiting from it. One of the key things to remember is that it provides clarity about which syntax should be used in which space and that by working together we are making very concrete progress towards achieving interoperability among syntaxes, which leads to certainty and increasing STP – so there are real business benefits.
The roadmap has also meant increasing cooperation among standardization bodies. For example we are working in a much more collaborative fashion with FPL than before, in particular in the area of pre-trade where we’ve defined a common business model that is in the process of being evaluated by ISO.
Courtney Doyle: Some areas of the roadmap allow for multiple syntaxes as indicated by the cross hatching. Why is this and what should firms do in this case?
Jamie Shay: As stated previously, the roadmap provides clarity around which ‘syntax’ is appropriate for which space. The single ‘standard’ is the common data model and common underlying dictionary – ISO 20022. The actual message representation may remain different depending on the syntax chosen to represent that common business model.
In some areas, we have more than one syntax represented in a given space because there may not be a “dominant’ syntax. In this case, firms should choose the syntax most suited to their environment or need.
Scott Atwell: As Jamie has stated, our objective is to feed and share a common business model, in which case having more than one syntax is not that significant as the core data and approach should not differ. In the Post-Trade / Pre-Settlement portion of the roadmap, for example, there is cross hatching of the FIX and ISO syntaxes and usage will depend on whether a firm’s STP initiatives are being driven more from the fron
t or back office. Firms may choose to use FIX when automating from the front office forward (e.g. adding allocation delivery to an OMS), or may choose to use the ISO syntax when automating from a back office perspective forward (e.g. building upon existing custodial communication).
Genevy Dimitrion: What is most important to our members is the business process. Although there are overlapping syntaxes, ultimately the business process behind each of them is the same. It is not practical to expect all financial communities to adopt a single syntax.
The roadmap is a framework that reflects the reality of the world we live in, underpinned by a common standard data model. From an organizational perspective, the services you provide tend to drive the standard you use which is clearly highlighted in the roadmap. In the cases where the cross hatching exists, firms should look at their key areas of focus to select the appropriate standard to develop.
Karel Engelen: The world of finance is not a set of segregated business lines to the degree it once was. Securities dealers trade in OTCs, derivatives dealers use securities to create structured products or hedge their positions and everyone dabbles in foreign exchange.
Implementing firms often want to maximize the return on their existing software investment by having each of their systems cover more of the trade lifecycle. As a consequence, the standards that support these businesses have had to expand into other domains to support their user base.
As mentioned by the others, the roadmap recognizes that in some functional areas there is more than one standard that can fulfil a particular function although there could be differences in the characteristics of each implementation. Some may be better for high trade volumes of relatively simple products, while others may excel at precise definition of complex financial products or structures traded with low volumes.
We feel that it is up to each community of users to choose the right solution for itself as this may depend on its existing standards usage and technology base. An establishedmessaging community, for example, might decide that leveraging its existing tech infrastructure and knowledge base was more cost effective than developing a parallel solution using a different standard for a new business problem.
Courtney Doyle: Are there thoughts of expanding this group to other standards bodies?
Jamie Shay: Yes, very much so. We are looking to collaborate with other standards organisations, such as XBRL. XBRL is involved in the financial ‘reporting’ end of the business and includes securities and transaction ‘issuers’. Capturing information at the site of the ‘issuer’ in the life cycle of a securities transaction will allow STP to flow throughout the entire chain of events, including the transaction life cycle and eventual reporting related to instruments, positions and statements. The roadmap is a living document. It should evolve as the industry evolves.
Karel Engelen: There is still plenty of scope for automation in finance, much of it outside the areas traditionally covered by FpML, FIX and SWIFT. We would be happy to see other standards integrated into the roadmap to further broaden the coverage to new product areas or processes.
Scott Atwell: Yes, I believe additional standards bodies will join the effort in the near future, and we are discussing reconstituting the group as ‘The Standards Coordination Group.’
Courtney Doyle: What are the next steps? How will the roadmap be maintained and updated?
Karel Engelen: The roadmap should not be seen as a static document. Each of the standards involved continues to evolve to meet the demands of its user base. The group that created it will need to periodically meet to review and update it. The end goal should be a set of interoperable standards covering the entire financial process and product space, unified by a common underlying business model whilst still allowing each to be attuned to the needs of the market it addresses.
Scott Atwell: This is an ongoing collaborative effort. I agree with Karel’s description of the end goal, however, there is a lot of work for us to complete before reaching it. FPL has committed significant technical resources to industry collaboration and the ISO process. ISO 20022’s Pre-Trade/Trade model is represented by FIX, and FPL is currently working with others to complete the Post-Trade model. In addition, FPL actively contributes to ISO WG4 and other areas focused on enhancing the ISO 20022 process. The roadmap will evolve over time. An example might be a previously over-thecounter product shifting to trading in a more listed nature.
Genevy Dimitrion: To follow on from Karel’s and Scott’s comments, we see the roadmap as an evolving document that will be revisited frequently as new products are introduced in the marketplace. We are looking to start addressing CFD’s and the best standards for them.
Jamie Shay: The next steps are twofold: on the one side, we need to continue to work with FPL and FpML to agree on the common business models and get them approved by ISO. We also need to encourage other standards organisations to work with us to expand the scope to cover other instruments, other business processes and other business domains.
We also need to find an easier way to be able to “automatically” produce a chosen syntax from the single business model. Work is ongoing to ensure multi-syntax representations of ISO 20022 compliant messages.
Courtney Doyle: How does the roadmap fit in with ISO 20022 and the goals of interoperability among standards?
Scott Atwell: I believe the roadmap has already paved the wa
y to improving ISO 20022, especially in terms of its ability to leverage and include existing, de facto standards. A key issue in years past was that the process required the creation of a new, ISO 20022 XML-specific message syntax for any messages added to the ISO 20022 data model. Now, the ISO 20022 process has been improved to the point that alternate syntaxes, such as FIX, can be recognized. This enables FIX and other messaging standards to contribute to the overall process, and more importantly allows users of these protocols to continue to leverage their current investment while achieving longer term benefits from the harmonization and collaboration of multiple standards.
The most important part of interoperability is that one can easily transition, in an automated fashion, from one stage of the trade lifecycle to the next. The roadmap facilitates a focus on these ‘peering points’ and the ISO 20022 data model provides a common model to reflect the data used throughout.
Jamie Shay: The roadmap provides clear direction about which syntax to use in which space, and building a common business model means these syntaxes will be interoperable. Interoperability will be possible once all the appropriate business models have been created in ISO 20022, and the industry embraces this standard.
Genevy Dimitrion: The roadmap clearly shows how 20022 provides a framework for binding multiple syntaxes together into a single standard and thereby achieving semantic interoperability. The business process and modeling is key to the success of these standards and their interoperability. The focus on the business functions and the interactions will allow for standards to be developed vs. the past in which standards were created and the business functions were integrated into existing formats. It allows firms to focus on the interactions among the industry players and the key data needed to successfully communicate in an automated way and increase STP within their organizations.
Karel Engelen: There are still areas where standards based messages are yet to be defined. In some cases these areas will be a natural fit with one of the existing standards but, if they are not, then proposing that they be developed within the ISO 20022 framework, rather than creating another standard, is a good route to follow.
To follow on with the thoughts around interoperability, this is a longer term goal and the key to it will be a common business model that captures and integrates all the different perspectives each standard has on the underlying business information. ISO 20022 has made a good start on this but there is still a long way to go.
Confucius said “A journey of a thousand miles begins with a single step.” It’s a good job we have a Roadmap.
The Investment Roadmap is available at: www.fixprotocol.org/investmentroadmap.