SWIFT steps towards automating transfer agency

By Tom Dillane Director of Product Integration
March 3rd 2022

Full end-to-end process automation remains an elusive goal for the global fund administration industry. SWIFT messaging standardisation is a big part of the solution.

Look at what SWIFT has done for the global banking system. The organisation was founded in 1973 to create a common international financial messaging language to facilitate communication about cross-border payments between users. Today, SWIFT carries over five billion financial messages a year for more than 11,000 institutions in 200+ countries and territories.

But the fund’s world needs more.

As global investment markets broaden and deepen, the speed and volume of data that investment managers, fund distributors and transfer agents need to exchange for trade instructions, settlements, payments and the like only grows. Using a standardised messaging format, so we don’t have to rely on ETLs to convert files, makes all that data exchange far simpler, faster and cheaper.

The Automatic Exchange of Information (AEOI) and Common Reporting Standard (CRS) are good examples. The standards that have been agreed allow diverse organisations across the world to exchange information easily, in formats everyone understands.

Funds get the message

At an industry level, we are making progress. SWIFT’s messaging offering for fund distributors, fund platforms and transfer agents standardises and automates order flows to promote transparency and straight-through processing. SWIFT enables firms to connect to counterparties, intermediaries and market infrastructures worldwide to settle and reconcile transactions, including repurchase agreements, portfolio transfers, internal account movements, collateral exchanges and corporate actions distribution. The Global Electronic Trade Confirmation solution automates equity and fixed income trade confirmations.

We have to go further though. The ongoing development of standardised messages for the whole sweep of investment management activities needs to continue. As does extending their use.

For the fund administration industry, reconciliations and settlement instructions remain particular pain points that would benefit from greater standardisation and automation.

At each stage of the transaction chain – from trade details to settlement instructions – information has to be checked and reconciled with multiple parties to ensure every piece of data is correct. And those steps must be completed in ever shorter timeframes.

Relying on traditional, manually-oriented tick-and-tie reconciliation processes is too cumbersome and error-prone to be sustainable. Industry-wide adoption of messaging standards would provide much-needed uniformity and automation, delivering valuable efficiencies while slashing risk.

SWIFT progress

Defaulting to SWIFT as the industry message standard offers clear benefits. So where clients don’t provide transaction files in the SWIFT format, our

Standardising settlement instructions – so a fund administrator’s systems can automatically ingest and reconcile what happened between the counterparties – provides similar benefits.

Rather than developing a bespoke file exchange every time, there is a new relationship, employing SWIFT file formats – whether or not the messages are transferred through the SWIFT network – means anyone exchanging a file is using the same language and knows what to expect. The resulting process automation it affords removes much of the manual reconciliation effort and risk and frees firms to focus on resolving exceptions.

They are benefits we hope everyone can get behind.

 

ABOUT DEEP POOL

At Deep Pool, we go a step further.

For one, we provide the industry-leading investor servicing software that fund administrators need to automate their end-to-end processes. The resulting efficiencies, scalability and client servicing benefits have proven transformative for users’ businesses.

But we also back the technology up with deep consulting expertise.

The Deep Pool team brings together qualified accountants, business analysts and software engineers to create a unique blend of industry know-how and experience. Having been on the client-side, we understand what it’s like. That makes us ideally positioned to deliver the best fixes for administrators’ problems and frustrations.

And where they need it, clients can lean into us for support. By leveraging our consulting services, clients can plug those knowledge gaps that departing staff may leave behind. This is a partnership after all. And we are dedicated to helping our clients maximise their success.

 

Tom Dillane
Tom has set up the data office at a fund admin which enabled data-based decision making at an exec level across all pillars from revenue to cost, marketing, resourcing, & product. He built out an analytics department in parallel to embed a scalable function for best-in-class product & application management.