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S.W.I.F.T. Invites Broker-Dealers and Investment Managers To Be Members

After years of being just "participants," investment managers and broker/dealers are officially welcomed.

After years of being a bank-only member organization, the S.W.I.F.T. board has finally opened the doors to the investment management and broker-dealer arena allowing them to participate as members.

As banks, broker-dealers and investment managers become more aligned in the services they provide, it only makes sense to include them in S.W.I.F.T.'s membership schema. In the past broker-dealers and investment managers were able to use the S.W.I.F.T. messaging network as "participants," but they could not be members or shareholders. Richard Genin, one of S.W.I.F.T.'s two U.S. directors and chairman of its securities steering council, says there are a series of reasons S.W.I.F.T. made this decision now. "It is the right thing to do. We are partners now. There are more and more joint ventures and consolidation is taking place. Having the distinction between how S.W.I.F.T. treats its banks, investment managers and brokers is a thing of the past."

Although the Board has never formerly voted on allowing these two categories to become members, there had been discussions about the subject in the past. At that time, "There were mixed emotions as to whether this was the right thing to do, but about six months to a year ago there was a clear direction with support that we should offer them membership, says Genin, who is also executive v.p. of worldwide operations for Bank of New York.

Genin continues, "I think there was a fear on some of the banks' parts of disintermediation. I think there was a distinction being made for all the wrong reasons. Since I have been on the Board-about four years-there have never been a real heavy discussion in terms of not inviting the broker-dealers or investment managers on to S.W.I.F.T." Because they were participants, they were basically getting the type of functionality they needed in order to use S.W.I.F.T. and operate on the S.W.I.F.T. network, "so the urgency was never there," he says. "The urgency now is there, however. Look at Travelers-a major bank, custodian and investment management arm under the same umbrella-look at the universal bank concept in Europe-that happened five years ago. The need for any distinction has now been obliterated."

Now that broker-dealers and investment managers are members, certain restrictions that they had as participants will be lifted. Genin notes that these were minor messaging restrictions, which did not have much of an effect on the participants. As members they will now share in the governance of S.W.I.F.T. and if their volumes are large enough they get to sit on the S.W.I.F.T. Board.

The cost per S.W.I.F.T. message will not change, Genin points out. "S.W.I.F.T. makes no distinction between participant or member. However, members will have to buy shares in S.W.I.F.T.-the number of shares will be based on its S.W.I.F.T. usage. At first, all broker-dealers and investment managers will be asked to buy one share-shares run at about $1500 or $1600," Genin notes. In about two years, S.W.I.F.T. will look at the traffic of the most current year and rebalance the shares. If a firm's S.W.I.F.T. usage dictates that it has to buy less than five shares, it doesn't have to buy any shares. However, if it registers as more than five shares, the firm will have to make that investment. "For a handful to a dozen based on current traffic, they could be asked to buy shares in the area of-for the big guys-the low side of $1 million, the high side of $2 million," Genin adds. Broker-dealers and investment management firms that wish to continue to use S.W.I.F.T. must become members. They do not have the option of remaining "participants." In June, participants will be contacted about their new membership status.

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