RTTM-IM Solution

Many Financial Organizations have in-house trading system for Mortgage Backed Securities. Trades generated by this system are sent to FICC for matching as part of the back-office processing procedures. Only after a successful match can the trades be reconciled and settled. Hence the matching step is very crucial to further processing. Since the trade-matching step is performed at a centralized location by an external entity (FICC), transferring the data in appropriate format is part of the back-office operating procedures.

While FICC continues to support its existing batch input and end-of-day output, plans are to eventually discontinue supporting these older formats. Members have been encouraged to make the shift from batch to interactive processing as soon as it is feasible for them to do so.

Some financial organizations still use FICC’s older batch file processing methods. Organizations generate SWIFT based multiple batch files per day that contain trade data for the trades executed. These files are transferred to FICC where the matching process attempts to match each trade with the appropriate trade from the counterpart.  Upon completion of the matching process output reports are generated which are transferred to the client for further processing. The output reports, among other items, contain the list of all the trades that matched successfully and list of trades that did not match.

It will be beneficial for organizations to to utilize FICC’s RTTM IM services to send and receive trade data, to FICC for matching, as they are executed.

Benefits

Interactive Messaging will allow organizations to submit trade input to RTTM intra-day as trades are executed and receive immediate notification of whether trades have been accepted or rejected by the system. Clients will also be able to receive Advisories for transactions submitted against them. The client and its contra-party will also be provided with up-to-the-minute trade status information as transactions are processed by RTTM (e.g. a message is sent when a trade compares, is canceled or is modified).

NDM-SWIFT Solution

Many Financial Organizations have in-house trading systems, which are used to trade Mortgage Backed Securities. As part of the back-office processing procedures, the trades generated by these systems, need to be sent to FICC for matching. Only after a successful match can the trades be reconciled and settled. Hence the matching step is very crucial to further processing. Since the trade-matching step is performed at a centralized location by an external entity (FICC), transferring the data in appropriate format is part of the back-office operating procedures.

In the recent past FICC used to process all input data twice a day by running the match process of all the data files received from its customers (e.g. Fannie Mae, etc.). This process had high latency between data submission and receiving trade confirmations, which exposed the end users to operational risk. To reduce the risk exposure to its customers and in an effort to provide quicker trade confirmation FICC implemented RTTM (Real-Time Trade Matching). RTTM has the capability of accepting trade data from its customers as soon as it is available from the customers trading system. However to allow for backward compatibility RTTM also supports the older methods of data acquisition using trade data files customers used with the predecessor of RTTM.

Challenges

The format of the data files exchanged during this process is well defined and published by FICC. Since the launch of RTTM, a new data file format has been available to customers’ that is based on the messaging standards of SWIFT. FICC has been encouraging its customers to move towards using this new SWIFT based file format instead of the older NDM format to submit the trade data for matching. To ease this transition FICC used to provide the transformation from NDM format to SWIFT format before performing trade-matching using RTTM.

Financial Organizations dealing in Mortgage Backed Securities have existing systems and procedures that generate trade data in NDM format. It will require significant effort to change these systems and procedures to generate the trade data in the new SWIFT format as advocated by FICC.

Ishi’s Solution Strategy

• design a configurable set of components to support multiple SWIFT formats
• XML definitions to address format changes
• existing infrastructure evaluation to ensure seamless integration
• performance testing plan and execution with load simulations to ensure performance criteria
• continuous integration planning and testing to ensure requirement coverage

Solution

Ishi’s solution is based on the creation of a transformation engine that will provide a set of services for trade data extraction, processing, conversion and delivery. The solution is highly customizable, using XML based definitions, to support multiple SWIFT formats and trade types.

Benefits

The key benefits of Ishi’s solution are:

• extensible design: support multiple SWIFT formats and trade types
• seamless integration: no change to existing applications
• efficiency gains: real time trade matching
• compliance: compliance with FICC guidelines