Vasu Prakasam, Managing Director

Kenya Commerce Exchange,

The SWIFT Bureau in NAIROBI.

SWIFT Presentation

24 February 2010Nairobi, Kenya

AITEC BANKING & MOBILE MONEYCONFERENCE

KENEX provides SWIFT connectivity to banks and isequipped to offer all products of SWIFT to banks, corporates

and eligible Financial Institutions.

KENEX BUREAUNairobi, Kenya

Agenda

• SWIFT and Securities Markets in Africa • SWIFT and Securities Markets in Africa

• Achieving DVP (Delivery vs. Payment)• Achieving DVP (Delivery vs. Payment)

• Introduction to SWIFT• Introduction to SWIFT

• Q & A• Q & A

Agenda

• Introduction to SWIFT• Introduction to SWIFT

1973-2009

Fund administrators

MA-CUGs

Banks found SWIFT

Money brokers

Trading institutions

- Registrars & transfer agents

- Custody providers- Trust or fiduciary

services companies

Investment managers

- Broker-dealers- Central depositories &

clearing institutions- Exchanges

- payments MIs- proxy voting agencies- non-shareholding financial institutions

- Treasury counterparties- Treasury ETC service

providers

Travelers' checks issuers

Securities MIs

1987

1988

1989

1990

1973

1992

199519

98

1999

2000

2002

2004

2008

Securities market data providers

1996

Treasury Securities ETC service providers

2009

Corporates

S.W.I.F.T

SWIFT in figures

8,242 users

208 countries

Peak day 17,860,068 messages (15 Oct 2008)

Average Daily Traffic 15,367,993

S.W.I.F.T

SWIFT in Africa

Over 1000 live users

54 countries

Agenda

• SWIFT and Securities Markets in Africa • SWIFT and Securities Markets in Africa

Why SWIFT in Africa Globalization drives cross-border trading Information requirements have exploded Need for infrastructure that works seamlessly both

within and across markets Efficient communication and secure messaging is

needed Africa has the same infrastructure needs as

markets everywhere and must meet international standards

But African markets are small and may not be able to acquire needed infrastructure

How can SWIFT How can SWIFT help you realise help you realise value?value?

Full ‘lifecycle’ of a trade on SWIFT

Payments

VMUs

Settlement instruction

Settlement confirmation

Collaterallending & borrowing

CorporateActions

Reporting

Trading - and

execution

Securities market:

Custodian

Post-trade

Pre-trade / Trade

I/CSD

Settlement

Reconciliation

Settlement

Reconciliation

Seller

Corporate

actionsPre-settlement

Reconciliation

Clearingagent

Buyer

Corporateactions

Pre-settlement

Reconciliation

Proxyvoting

MT-based MX-based (under development)

Broker/Dealer ServicesBroker/Dealer Services

Broker Dealer Services

• Multi Asset Class Transaction Processing

• Cross Border Trade Allocation/Confirmations

• Regulatory reporting for Domestic and Global Markets

• Order Management

• Trade Management

• Asset Servicing

• Financing and Position Management

• Settlement Management

PRE_TRADEPRE -TRADE

TRADE PRE_TRADEPOST-TRADE

PRE-SETTLEMENTPRE_TRADE

CLEARINGSETTLMT/RECON

PRE_TRADECUSTODY PRE_TRADEASSET

SERVICING

SWIFT offers a suite of messages that handle the requirements of all Asset Classes.

These messages cover 8 main categories

Investment Lifecycle – B/D services

Asset Servicing:-Corporate ActionsMT 564-565-566-567-568-Depository Receipts (Instr Change)MT 587-588-589

Asset Servicing:-Corporate ActionsMT 564-565-566-567-568-Depository Receipts (Instr Change)MT 587-588-589

Order Management:MT 502-509- FIX over SWIFT

Order Management:MT 502-509- FIX over SWIFT

Trade Management:MT 513-514-515-517-518-576-584

Trade Management:MT 513-514-515-517-518-576-584

Financing/Position Mgmt:- Position/Movement StatementsMT 535-536-537-549-575- Stock Lending/BorrowingMT 516-526-581-582- Depot Management (Intra)MT 508-524-538- Collateral ManagementMT 527-558-569- Margin MT 503-504-505-506-507 - Treasury MT 300 Series

Financing/Position Mgmt:- Position/Movement StatementsMT 535-536-537-549-575- Stock Lending/BorrowingMT 516-526-581-582- Depot Management (Intra)MT 508-524-538- Collateral ManagementMT 527-558-569- Margin MT 503-504-505-506-507 - Treasury MT 300 Series

Settlement Management:-Settlement InstructionsMT 528-529-540-541-542-543-Settlement ConfirmationsMT 544-545-546-547-Settlement Status/AllegementsMT 548-578-586

Settlement Management:-Settlement InstructionsMT 528-529-540-541-542-543-Settlement ConfirmationsMT 544-545-546-547-Settlement Status/AllegementsMT 548-578-586

Accounting/Reporting:- Position/Movement StatementsMT 535-538- GeneralMT 590-591-592-595-596-598-599

Accounting/Reporting:- Position/Movement StatementsMT 535-538- GeneralMT 590-591-592-595-596-598-599

Investment managementInvestment management

Reaping the benefits of automation

Investment Manager

Payments & Cash management

Foreign Exchange

Money Markets

Derivatives

Securities reporting

Collateral Management

Securities lending & borrowing

Trading, Indication Of Interest

Post trade matching

Clearing and Settlement

Corporate Actions

Investment Managers are at the centre of every securities transaction

SWIFT offers the financial industry a common platform of advanced SWIFT offers the financial industry a common platform of advanced technology and access to solutions through which you can build your technology and access to solutions through which you can build your competitive edge.competitive edge.

Investment Investment ManagerManager

Global ReachOver 8,200 end-points in 208 countries

The SWIFT networkBringing Global Reach

800

2,800

600

1,100

1,6001,200

All leading brokers and custodians and 90 % of top Investment managers (>100 billion) are connected to the

SWIFT network

The current challenges for an Investment Manager

Volumes•Volume sensitive and exposed to risk. With small margins, risk can be significant if something goes wrong. Volumes are not only increasing but values are higher as institutions bundle orders.

•Business growth and fluctuations in dealing volumes

•Manual processes are not scalable and time is needed to train and recruit staff

Efficiency•Processing time becomes an issue when continuing to work in manual mode.

•Manual intervention reduces competitiveness because of early cut-off times

Cost Risk•True processing costs are ignored, because a number of costs are hidden - Current focus has been to handle and support growth. - However, due to consolidation, competition increases, margins further decrease; then costs are looked at

• Accurate processing, no errors - Manual work increases operational risk - Order amounts increase as more institutions bundle their orders.• Financial risk is widely disregarded until there is a problem.

Increasing the value of SWIFT for Investment Managers

Value drivers for the industry

Reach (Standardised Messaging)

Re-usability(Single Window)

STP

Resilience / Security

Pricing

Reach (Standardised Messaging)

Re-usability(Single Window)

STP

Resilience / Security

Pricing

Stand

ards

Quality of Service

Comm

unity

Value delivery channels for an institution

Custodian ServicesCustodian Services

Functions that SWIFT supports for the custodian segment of the trade life-cycle

ReportingReporting

Client

Operations

Management

Ancillary FunctionsAncillary Functions

Reconciliation/ Control

Interfaces

Information FeedsPricingCorporateActions

••

• Income/Dividends

F/X

F/X

Cash ManagementCash Management

&Attribution

Performance

Measurement&

Attribution

• Accounting/NAVS• Administration• Transfer Agency

Fund Support•

Accounting/NAVS

• Administration

• Transfer Agency

Order ManagementOrder Management

Confirmation/Affirmation and

Allocation

Confirmation/Affirmation/Allocation

Portfolio ManagementPortfolio Management

Settlement/Clearance &Custody

Settlement/Clearance &Custody

PortfolioAccounting

Execution

Execution

Margin/CreditMargin/CreditSecurities Lending/

Borrowing

Securities Lending/Borrowing

Risk ManagementRisk Management

ComplianceCompliance

MT516,526,581-582

MT300,304CLS

MT900,910,940,950MT103,202

FIX: MT502,509 MT513

MT515,517,518

MT508,524,540-549,578,535-538,575-576,

584,586-589,564-568

SWIFTNet FundsMT502,509,515

MT535-537

Market Data Solution

MT535-537, 575,576

Securities Market InfrastructuresSecurities Market Infrastructures

Securities Market InfrastructuresArgentina Caja de Valores

Australia Australian Stock ExchangeSFE – Austraclear

Austria OeKB

Belgium CIKEuroclear BankMTSNational Bank of Belgium

Brazil CBLC

Canada CDS

Croatia Sredisnja Depositarrna Agencija

Denmark OMXVP

Estonia Estonian Securities DepositoryOMX

Finland NCSD Finland – APKOMX

France Euroclear FranceEuronext Paris – MATIFMTS

Germany Eurex ClearingClearstream Banking AGMTS

Greece Central Securities DepositoryBank of Greece

Hong Kong HK Futures ExchangeHong Kong Monetary AuthoritySEHK Options Clearing House

Hungary Keler

Israel Tel Aviv Stock Exchange

Italy CCGMonte Titoli

Japan Bank of JapanJSCCTokyo Stock Exchange

Kazakhstan Kazakhstan Stock Exchange

Korea Securities Depository

Latvia Bank of LatviaCentral DepositoryOMX

Lebanon Midclear

Lithuania OMX

Luxemburg Clearstream Banking SA

Mexico S.D. Indeval

Netherlands Euroclear NederlandMTS

Norway VPS

Poland National Depository for Securities – KDPW

Portugal Banco de Portugal – SITEMEMTS

Russian Federation

Depository Clearing CompanyThe National Depository Center

Singapore Central DepositorySingapore Exchange

Slovakia Bank of Slovakia

Slovenia Central Securities Clearing Corporation – KDD

South Africa STRATEJSE Securities Exchange

Spain IberclearMEFFMTS

Sweden NCSD Sweden – VPCOMX

Switzerland SISSIS x-clear

Taiwan Securities Central Depository

Thailand Thailand Securities Depository

UAE - Dubai DIFX

UK (& Ireland)

CRESTLCH.ClearnetLondon Stock Exchange

USA Chicago Mercantile ExchangeClearing CorporationDTCCFederal Reserve BanksOmgeoOptions Clearing Corporation

Zimbabwe Reserve Bank of Zimbabwe

Standards

Recommendations, Barriers or Regulations

20012001 CPSS-IOSCOCPSS-IOSCO Recommendation 16Recommendation 16: “Securities Settlement Systems should use or accommodate relevant international communication procedures & standards…”

20032003 G30G30, Recommendation 2, Recommendation 2 ““Harmonise message standards & communication protocols”

20032003 GiovanniniGiovannini, Barrier 1, Barrier 1“Define EU wide protocol to eliminate national differences in IT & interfaces used by Clearing & Settlement providers”

20042004 ESCB-CESR,ESCB-CESR, Standard 16 (draft) Standard 16 (draft) “Entities providing securities clearing and settlement services, and participants in their systems should use or accommodate relevant international communication procedures and messaging and reference data standards………”

G30 Global Clearing and Settlement: A Plan of Action - Recommendation 2Harmonise messaging standards & communication protocols

“All market participants should adopt ISO15022 as the global standard for straight-through securities messaging across the entire securities life cycle”

“XML should become the language to describe standardised messages”

“Market participants should support and use communication networks that adopt open, standardised, IP-based protocols for securities transactions”

A world without SWIFTDifferent Standards, Messaging & Connectivity

MarketInfrastructures

User

Single Window from SWIFTReusing Standards, Messaging and Connectivity

MarketInfrastructures

User

SWIFT meeting the challengePresent and future

Communication network

– SWIFTNet (IP based service)

Market Practice Standards worldwide

– Securities Market Practice Group (SMPG)

Data Standards

– ISO15022

– SWIFT ISO XML Standards

– UNIFI (ISO20022 - Standards convergence)

What can SWIFT bring to theEAC Securities Markets?

Standards Security, Reliability and Risk Resilience Co-Operation Services Provide VALUE to the whole market SWIFT has done it before

Revenues/ Revenues/ PortfolioPortfolio

Conclusion

Net Profits/ Net Profits/ Portfolio Portfolio

PerformancePerformance

Multiple Multiple StandardsStandards

Complex Complex ProductsProducts

Manual Manual ProcessesProcesses

Legacy Legacy SystemsSystems

Lack of Systems Lack of Systems IntegrationIntegration Multiple LinksMultiple Links

Cost Reduction and Improved Performance

Agenda

• Achieving DVP (Delivery vs. Payment)• Achieving DVP (Delivery vs. Payment)

Stock-Market Stock-Market Securities Securities TradeTrade flows flows WithoutWithout Allocation process, Allocation process, without without AffirmationAffirmation processprocess

Stock Exchange

Buyer’s Broker

Seller’s BrokerBuyer’s

Investment Manager

MT 502

MT 513

MT

502

MT

502

MT

518

MT

518

MT 515

MT 509

MT 515: Broker sends complete info on securities purchased or sold.

MT 513: Broker sends preliminary info only.

These messages are not mutually exclusive.

Stock-Market Stock-Market Securities Securities TradeTrade flows flows WithWith Allocation process, Allocation process, with with AffirmationAffirmation processprocess

Stock Exchange

Buyer’s Broker

Seller’s BrokerBuyer’s

Investment Manager

MT 502

MT 513

MT

502

MT

502

MT

518

MT

518

MT 514

MT 515

MT 517

Allocation process: MT 514s and MT 515s.

Affirmation process: MT 517.

These processes can exist independently from one another.

MT 509

Securities Securities Settlement Settlement flows for versus payment transactions flows for versus payment transactions ““Full DVPFull DVP market” market”

Seller’s BrokerBuyer’s

Investment Manager

MT

541

MT 545

MT 541

Central Securities Depository

Seller’sCustodian

Buyer’sCustodian

MT

543

MT 543

MT 547

MT

545

MT

547

MT

548

MT

548

MT 548 MT 548

Securities Securities Settlement Settlement flows for versus payment transactions flows for versus payment transactions ““non-DVPnon-DVP market” market”

Seller’s BrokerBuyer’s

Investment Manager

MT

541

MT 544

MT 540

Central Securities Depository

Seller’sCustodian

Buyer’sCustodian

MT

543

MT 542

MT 546

MT

545

MT

547

MT

548

MT

548

MT 548 MT 548

Buyer’s Cash Correspondent

Seller’s Cash Correspondent

Central Bank

MT

202

MT 202

MT

210

MT

942

MT

207

MT

900 M

T 900M

T 210

Category 2 - Financial Institution Category 2 - Financial Institution TransfersTransfers

– MT 202 General Financial Institution Transfer

– MT 207 Request for Financial Institution Transfer

– MT 210 Notice to Receive

Category 9 – Cash Management Category 9 – Cash Management and Customer Statusand Customer Status

– MT 900 Confirmation of Debit

– MT 942 Interim Transaction Report

Category 5 – Securities MarketsCategory 5 – Securities Markets– MT 502 Order to Buy or Sell

– MT 509 Trade Status Message

– MT 513 Client Advice of Execution

– MT 514 Trade Allocation Instruction

– MT 515 Client Confirmation of Purchase or Sale

– MT 517 Trade Confirmation Affirmation

– MT 518 Market Side Securities Trade Confirmation

– MT 540 Receive Free

– MT 541 Receive Against Payment

– MT 542 Deliver Free

– MT 543 Deliver Against Payment

– MT 544 Receive Free Confirmation

– MT 545 Receive Against Payment Confirmation

– MT 546 Deliver Free Confirmation

– MT 547 Deliver Against Payment Confirmation

– MT 548 Settlement Status and Processing Advice

ISO 15022 & FIN Message Types used in mappingISO 15022 & FIN Message Types used in mapping

What needs to be shared?

Standards Business practices Business solutions Market Infrastructures Infrastructure Components / Services Resources

Prerequisites for sharing

Shared vision

Common understanding

Perceived benefit

Champion/s

How does Africa benefit?

Your return on our investment Your return on our investment

Global counterparty connectivity Greater risk mitigation, compliance and inward

investment for the region World standardised and integrated financial

infrastructure A strong foundation for outward investment

opportunities

The SWIFTNet messaging services

SWIFTNet FIN

• Secure, reliable, and STP-oriented messaging using SWIFT MT formats.

• Appropriate for exchange of individual structured financial messages and short reports.

SWIFTNet InterAct

• Secure, reliable, and STP-oriented messaging using new SWIFT MX or proprietary formats.

• Appropriate for exchange of individual structured financial messages and short reports.

SWIFTNet FileAct

• Secure, reliable, and flexible file transfer (any formats).• Appropriate for exchange of batches of structured financial

messages and large reports.

SWIFTNet Browse

• Secure browsing.• Appropriate for manual transaction input and reporting using

HTML-based graphical user interfaces.

Business solutionsCustomer solutions

SWIFTNet FIN

Broader rangeof business

solutions

Extendedreach

Access to MI’s Enabling thecommunity

SWIFTNet

More than 8,000 FIN correspondents in

more than 200 countries

AccordCash reportingBulk payments

MA-CUGSCORE

RTGSACH

SWIFTNet: single window accessto the financial worldMarket infrastructures

Partnership

Successrequirespartnerships

SWIFT is your partner

&&uestionsAnswers