Infrastructure capitalising on best in class

1
Infrastructure capitalising on best in class

• Electronic Trade Confirmation

Brett Kotze Senior Manager Clearing
Settlement 15 August 2002
2
The STP Context
The goals of STP are -

• End-to-end automation of the trading process

• Manage the increased volumes and risk
  requirements of the securities trading business

• Create the foundation for efficient electronic
  flow of cross-border trade information

Create a seamless flow of information from the
initial order capture straight through to final
settlement
3
STP and the JSE

• The STP initiative provides a technology platform
  to support the processing of
• Electronic Trade Initiation (ETI)
• Electronic Trade Confirmation (ETC)
• Electronic Trade Settlement (ETS) and
• Electronic Data Interchange (EDI).

• The JSEs primary focus has been ETC as the most
  critical component to enable settlement

• ETC encompasses
• Trade Allocations (flowing from Fund Manager to
  Broker)
• Contract Notes (flowing from Broker to Fund
  Manager)
• Trade Affirmation (flowing from Fund Manager to
  Broker)

4
The Settlement Wheel
The settlement wheel is a graphic depiction of
the message flows between entities

Contract Note
Broker
Fund Manager
Affirmation
Settlement Order
Status Intimation
STRATE
Settlement Instruction
Confirmation
Lending Transactions
Allegement
Loan Order
Custodian
Lending Desk
Commit
Match Confirmation
The focus is the Broker / Fund Manager interface
5
Success factors for ETC

• Standards
• Adopting compatible standards

• Connectivity
• Network connectivity requires routing, format
  mapping and protocol conversion

• Vendor support
• Vendors assist in satisfying industry needs by
  focusing on niche opportunities

• Automation
• Brokers must automate internally and connect
  externally

6
ETC at the JSE

• The ETC solution caters for 3 network providers
  being
• SWIFT
• HERMES (Peresys VPN)
• OASYS (Thomson Financial Service)

• The JSE bureau handles all 3 network providers
  and has thus brought about economies of scale by
  centralising the environment and administration
  costs as well as providing a stronger basis for
  negotiations with providers.

• To reduce the risks and costs for stakeholders,
  the JSE utilised as much of its current
  infrastructure as possible, as well as entering
  into a Licensing Agreement with Peresys for the
  HERMES STP Listener.

7
Messaging from Broker
SWIFT
Fund Manager A
Broker A
JSE MAINFRAME
BDA
MERVA
Peresys VPN
Fund Manager B
Message Stringer
Broker B
Hermes STP Listener
Hermes STP Listener
Broker C
Fund Manager C
OASYS
CiscoRouter
CiscoRouter
CiscoRouter
CiscoRouter

• Messages from the Broker are generated by BDA,
  formatted for MERVA and then routed through the
  applicable network service.

• A response from the Fund Manager follows the
  reverse path.

8
Messaging to Fund Manager
SWIFT
Fund Manager A
Broker A
JSE MAINFRAME
BDA
MERVA
Peresys VPN
Fund Manager B
Message Stringer
Broker B
Hermes STP Listener
Hermes STP Listener
Broker C
Fund Manager C
OASYS
CiscoRouter
CiscoRouter
CiscoRouter
CiscoRouter

• Messages to the Fund Manager are routed through
  either SWIFT, HERMES or OASYS.

• A response from the Fund Manager follows the
  reverse path.

9
Current Status of ETC

• 4 Fund Managers are using the solution for
  contract notes.

• Fund Managers are not yet using the solution for
  allocations or affirmations as their preference
  was to implement the contract note solution first
  to alleviate the current back-office pressures.

• Costs
• Network provider charges are catered for in the
  contract between the participant and their
  respective network provider.
• The JSE charges the Broker on each message
  (either inward or outward) for the infrastructure
  provided.
• The JSEs billing module has been implemented
  which caters for itemised billing per user per
  message type.

10
Where to from here?

• The JSEs vision with regard to ETC is to
  eventually achieve end-to-end automation

• The immediate next steps are

• Continue marketing the ETC solution and encourage
  more participants to use the solution.

• Work with the Fund Managers to clarify standards,
  processes and infrastructure

• Enhance the ETC solution to cater for allocations
  and affirmations

• Ensure a high degree of ETC amongst market
  participants in order to move to T3

11
The End
?
Questions