Wholesale Financial Markets

For more than a decade, banks have been trading financial instruments among each other via specialised inter-bank electronic platforms. Until recently, almost all trading with corporate and fund management clients was still done over the telephone. Banks and others are now extending electronic trading to a wide and varied client base. This will allow both banks and their clients to maximise operational and dealing efficiencies by a combination of electronic execution via trading platforms and the straight through processing of transactions, from the electronic trading platforms through to treasury management and banking systems.

Each electronic trading platform, treasury management system and banking system has been built to its own specifications. Connecting them has required multiple customised interfaces. In aggregate, these are extremely expensive to construct and to maintain. Today, the obvious solution is to have a single, XML-based, set of standard interfaces that all parties can implement. This not only simplifies and dramatically reduces the cost and timescale required for systems integration, but also allows corporate and institutional clients a wider choice of trading platforms, treasury management systems and banks.

The development of these standard interfaces requires close cooperation between market participants with different interests. With banks and software vendors developing proprietary solutions, and existing standards organisations not being in a position to offer a solution, a new proactive initiative was required.

TWIST has identified and defined standard good practice processes throughout the transaction processing life cycle, including processes using electronic trading platforms. This avoids the fragmentation that would result from the development of multiple approaches among vendors, or the emergence of fragmented standards that do not meet the needs of all market participants. By addressing the concerns of all the parties involved, the TWIST standards aim to benefit the whole industry, and to drive the growth and efficiency of the global wholesale financial markets.

To ensure a straight through process throughout the wholesale trade life cycle, the individual activities in the process need to be viewed as a string of interrelated process steps. TWIST has identified the following sub-processes that are the basis for the design of its standards:

• Relationship Management
• Trade Origination
• Execution & Confirmation
• Settlement & Reconciliation
• Reporting

In order to achieve effective straight through processing (STP) of transactions throughout the lifecycle with single points of data entry, this also requires structuring and standardising the integration of internal systems like ERP systems, trade identification systems, trade pricing systems, credit and risk management systems, back-office, payment and reporting systems.

TWIST’s initial focus was on FX and loans & deposits, because these are the largest wholesale financial marketplaces , with commoditised products , they have led the way in moving to electronic trading and they have wide participation, including corporates, fund managers, banks and brokers. In addition, there are clear benefits of standards , in terms of market accessibility and transparency, and in the improvement of the straight through processing of transactions. TWIST is also soon to release standards covering tradable securities (starting with Commercial Paper and Bonds) and Over The Counter (OTC) instrument types).