FMSB Publishes SSI Draft Standard
Posted by Colin Lambert. Last updated: July 15, 2024
The Financial Markets Standards Board (FMSB) has published a transparency draft on a new standard for the sharing of standard settlement instructions (SSI), which would be relevant to all firms managing the instructions themselves, or on behalf of customers as custodians or prime brokers.
The draft has two main parts, a Standard, which lays out core principles for the channels, processes, and governance around sharing of SSIs, and Templates, which proposes standardised templates, based on industry-standard taxonomy, for use in residual cases where SSI instructions are sent manually.
FMSB says it is seeking views on the Standard and Templates, the final version of which will form part of the annual attestation that each FMSB member firm is expected to make and which non-members are encouraged to consider for adoption. The standards body says it is also seeking views on a selection of potential authentication options to address the vulnerabilities in the manual sharing of SSIs, but which will not form part of the Standard.
“This Standard aims to increase the adoption of electronic solutions that allow for standardisation and pre-authentication of settlement instructions, and which facilitate Straight-Through-Processing, to improve efficiency of SSI management by recipient counterparties and reduce settlement fails through incorrect SSIs,” FMSB states.
“Where such electronic solutions are not legally or operationally feasible, this Standard incorporates templates for manual sharing of SSIs which incorporate an industry-standard taxonomy (based on ISO 20022), which should minimise ambiguity around SSI data fields and allow for recipient counterparties to automate their ingestion.”
FMSB observes that the most significant cause of fails at the settlement stage, after lack of inventory, is incorrect or missing SSIs, adding that human intervention is necessary to resolve exceptions prior to settlement, especially to remediate incorrect SSIs. “This inefficiency is likely to become a greater risk with more jurisdictions moving towards accelerated settlement, including the UK’s planned move to T+1 in 2027 as outlined in the Geffen Report, leaving less time to input or amend the correct settlement details,” FMSB says.
It also points out that a significant factor is the continued use of manual SSI exchanges, which are prone to errors from transposition, and due to a lack of standardisation in taxonomy and format, are difficult to automate for ingestion by the receiving counterparty. It notes, however, that errors may also occur even with the use of industry-wide automated SSI sharing solutions, due to insufficient discipline around their usage.
FMSB says it would now like to seek feedback from a broader range of market participants to verify the outputs, and to ensure that they are compatible with manual exchanges of SSIs at other parts of the trade lifecycle. To this end, it invites comments on any or all of the proposed Standard and Annexes by 18 October 2024.
The draft standard can be found here.