SIA SHOW: Industry Running Out of Time For 15022 Conversion

Financial institutions that make use of Society for Worldwide Interbank Financial Telecommunication (SWIFT) standards, such as ISO 7775, are facing a stiff November deadline for converting to the new 15022 standard.

At the Securities Industry Association's Operations Conference in Palm Springs, Calif. this year, Francis Remacle, head of SWIFT's Securities Industry Division, said that institutions were not converting over to the new standards at the necessary rate and emphasized that the deadline would not be moved.

Tim Lind, a senior analyst in the Investment Management Practice at TowerGroup, a Mass.-based firm following the impact of technology on financial services, says that some firms may be resisting the conversion because of an -- If it's not broken, don't fix it -- kind of attitude.

"Many have good rates of straight-through processing on vanilla trades right now," says Lind, a former SWIFT employee. "If they have automation around the old messages, the last thing they want to do is pull that out and stop it."

But, as seems apparent from Remacle's comments, they will have to do it, and soon. Solutions for handling the conversion at this year's SIA Technology show include an offering by STP-solutions provider Heliograph, which provides an ISO 15022 converter.

At a basic level, the solution can provide a straight conversion, and is described by Richard Vreeland, Heliograph chief operating officer, as "a good way to get up and running very quickly without much implementation time." He adds that firms should allow at least two months before the deadline, giving them a Sept. 1 start date.

Lind, however, says that two months is far too little time and that any large custodians, for example, that may be sitting on the sideline will likely not be ready for the new messages. That's because converting is not merely about being able to construct 15022 messages, but rather about testing with each and every counter party.

"The train has already left the station," says Lind. "You need a year if you're a large global custodian that is getting SWIFT messages inbound from the buy side and sending out SWIFT messages to between 80 and 100 sub custodians. With 100 counter parties, testing in and out with each party needs to be done."

Lind says the reason so much testing is required is that, much like bringing on a new counter party in the FIX world, institutions must ensure that their new partner is speaking the same version of a standard. The result of incongruent messages, says Lind, could be million-dollar trading mistakes.

Lind also says that, even though the conversion plans have been out for a number of years, it is almost impossible for firms to allocate dollars to a project which is far down the road. "If you want to get approval for a budget deliverable that's three years out, you will never get the money. Firms have to take care of immediate points of pain," he says.

Vreeland says that Heliograph will be touting its 15022 solution, along with its corporate-actions-automation system, called Event, at this year's show.