Despite the tremendous push towards fully automating trade confirmations between banks and corporates in recent years, many transactions are still confirmed manually.
Manual confirmations are slow and error-prone, putting both sides of the trade at risk. In addition, many international regulations such as EMIR and Dodd-Frank have demanded an increase in automation.
Corporate treasurers often use SWIFT to standardize their confirmation messages. SWIFT is a cooperative that connects the financial community by providing highly secure financial messaging services that eliminate manual processing and makes inefficient paper confirmations redundant. More than 11,000 financial institutions, corporations, and other financial entities use SWIFT to exchange confirmations (SWIFT, 2019).
This article will explore several ways to confirm foreign exchange, money market, and currency option settlements through different solutions connected to SAP.
SWIFT Connectivity
Over the last several years, the SWIFT Network has experienced growing popularity with corporates of all sizes, stretching from large corporates with a high volume of transactions to small-to-medium corporates with a lower volume of transactions. As a result, corporates have several options when deciding on a connectivity solution:
Figure 1: Direct Connectivity (SWIFT, 2019)
2. Alliance Lite2 is a packaged offering from SWIFT providing connectivity through a web browser or the embedded Lite2 for Business Applications (L2BA). Alliance Lite2 offers a simple, secure, cloud-based SWIFT connection. It connects to SWIFT through HTTPS and enables users to access the Alliance Lite 2 GUI. Since 2015, 61% of new corporate customers have opted for Alliance Lite2 (SWIFT, 2019).
Figure 2: Alliance Lite 2 (SWIFT, 2019)
3. SWIFT Service Bureaus (SSBs) provide a connection to the SWIFT network without the need to have an in-house IT department managing and maintaining the SWIFT connectivity. Furthermore, using an SSB can eliminate the need to undertake extra audit and compliance procedures. SSB providers vary in price but tend to be less expensive compared to direct in-house connectivity. It is still important to mention that initial investment is needed to set up the connectivity solution.
Figure 3: Swift Service Bureau (SWIFT, 2019)
4. Finastra Fusion Confirmation Matching Service (CMS) supports a hosted SWIFT connectivity through a Software as a Service (SaaS) application. It provides a confirmation matching solution for FX, Money Market, FX Options etc. This requires no upfront investment in infrastructure or implementation from the corporates availing of their services. It is directly hosted and managed and maintained by Finastra. Their File Transfer Service (FTS) is a secure process of moving messages between Misys CMS and clients ERP or TMS. FTS picks up and transfers files from the client to Misys CMS, converting the files to match trade data. After which, a matched message status is sent back to the client’s SAP TMS (Finastra, 2021).
Trading Platforms
Trading platforms such as 360T, Bloomberg and FXall offer automated back-office trade processing with SWIFT confirmation messages and trade matching.
The service allows corporate treasurers and banks to exchange deal confirmations directly on the trading platform. Messages are sent via the SWIFT networks directly to and from the banks, with the outgoing (incoming confirmation) and incoming messages (bankside confirmation) being automatically processed on the platform.
SAP Multi-Bank Connectivity
SAP Multi-Bank Connectivity (MBC) is SAP’s offering of a SWIFT connection embedded within Business Applications. This cloud-based solution offers a multi-bank digital channel between SAP and partner banks. In addition, SAP MBC is being provided as a SaaS solution by SAP.
A SWIFT Service provider is not needed for SAP customers to send confirmations messages through the SWIFT network, as SWIFT services are given by SAP through an embedded version of Alliance Lite 2. This streamlines trade confirmations for the TRM module, as message statuses are automatically updated directly in SAP. Moreover, the integration platform offers connectivity to partner banks through EBICS and Host-to-Host connection.
Figure 4: SAP MBC (SAP SE, 2018)
SAP Correspondence Monitor
This framework in SAP is an excellent tool to manage all correspondence objects. For example, back-office users can view incoming and outgoing messages and resend those messages previously failed to send. In addition, the monitor provides a historical overview of all the deals that have previously been confirmed.
Furthermore, it also allows you to view PDF messages that have been sent out, for example, to your internal counterparties. Through the t-code, technical users can customize messages when their requirements are not covered by standard functionality. For example, previously, SAP TRM did not offer MT305s as a standard message format. The user could then reconfigure standard functionality to fit different message types not provided in the standard TRM Module.
Below is an example of a corporates SAP TMS connected to the SWIFT network through a SWIFT Service Bureau.
Figure 5: SAP Confirmation Connectivity
Conclusion
SWIFT Service Bureaus and Alliance Lite2 have been the most popular choice in sending out confirmations to and from the bank, with over 50% of all corporates accessing SWIFT through either connection. However, the offering of SAP Multi-Bank Connectivity is especially attractive to those corporates with a technology roadmap leading towards SAP as a key ERP provider. Nowadays, many corporates are transitioning towards their S/4 HANA transformations journey and are looking at their SWIFT connectivity options. Therefore, SAP Multi-Bank Connectivity is likely to compare favorably to SWIFT Service Bureaus in the coming years.
References
1) Finastra. (2021). From https://www.finastra.com/sites/default/files/file/2021-09/Confirmation-Matching-Service_FS_GL3800_FINAL.pdf
2) SAP SE. (2018). SAP Multi-Bank Connectivity.
3) SWIFT. (2019). S4C Workshop., (p. 95). Cape Town.
In the stress test methodology, participating banks are required to evaluate the impact of a cyber attack. They must communicate their response and recovery efforts by completing a
Find out more
In this report, biodiversity loss ranks as the fourth most pressing concern after climate change adaptation, mitigation failure, and natural disasters. For financial institutions (FIs), it
Find out more
Carbon offset processes are currently dominated by private actors providing legitimacy for the market. The two largest of these, Verra and Gold Standard, provide auditing services, carbon
Find out more
Early October, the Basel Committee on Banking Supervision (BCBS) published a report[1] on the 2023 banking turmoil that involved the failure of several US banks as well as Credit Suisse. The
Find out more
Today, we engage in a conversation with Brecht van den Driessche, a new addition to the Zanders team, to explore his motivations for joining Zanders and his vision for the future of risk
Find out more
SWIFT now supports the exchange of ISO 20022 XML or MX message via the so-called FINplus network. In parallel, the legacy MT format messages remain to be exchanged over the ‘regular’ FIN
Find out more
As the first conference in the US since its 4-year hiatus, there was good attendance among corporates and partners. The SAP Treasury conference is an excellent opportunity for customers to see
Find out more
Of the many attending corporates and partners were offered the opportunity to hear the latest ins and outs of treasury transformation with S/4HANA. Next to the enhancements in
Find out more
The SAP Business Technology Platform (BTP) is not just a standalone product or a conventional module within SAP's suite of ERP systems; rather, it serves as a strategic platform from SAP,
Find out more
Yet, the ongoing dilemma lies in achieving optimal returns on these investments. In this intricate financial landscape, the importance of delivering robust financial performance not only at
Find out more
Treasurers dealing with multiple jurisdictions, scattered banking landscape, and local requirements face many challenges in this regard. Japan is one of the markets where bank connectivity
Find out more
The EMIR Refit was originally introduced with the goal of simplifying regulations, and these new requirements took effect in 2019. Following the EMIR Refit, there has been a subsequent round
Find out more
First and foremost, the long period of low and even negative swap rates was followed by strongly rising rates and a volatile market, which impacted the behavior of both customers and banks
Find out more
On Thursday 15 June 2023, Zanders hosted a roundtable on ‘Climate Scenario Design & Stress Testing’. In our head office in Utrecht, we welcomed risk managers from several Dutch banks.
Find out more
Seventy banks have been considered, which is an increase of twenty banks compared to the previous exercise. The portfolios of the participating banks contain around three quarters of all EU
Find out more
The CSP helps reinforce the controls protecting participants from cyberattack and ensures their effectivity and that they adhere to the current Swift security requirements. *Swift does not
Find out more
Machine learning (ML) models have proven to be highly effective in the field of credit risk,outperforming traditional regression models in their predictive power. Thanks to the exponential
Find out more
In this third article in the ISO 20022 series, Zanders experts Eliane Eysackers and Mark Sutton take a focused look at the Common Global Implementation Market Practice Group (CGI-MP).
Find out more
As a result of the growing importance of this transformative technology and its applications, various regulatory initiatives and frameworks have emerged, such as Markets in Crypto-Assets
Find out more
However, possibly the most important point for corporates to be aware of is the planned move towards explicit use of the structured address block. In this second article in the ISO 20022
Find out more