Logica plc is a systems integrator and consultancy active in providing customized mission-critical solutions to awide range of clients including those in the financial services industry.

A key area of financial services is STP or straight-through processing. This relates to the business process redesign, integration, implementation, and management of electronic order to settlement (straightthrough) processing capability to support new electronic operations in both retail financial services and financial markets.

The idea is that transactions are entered once into the system (upon deal capture) and that all requisite information is then automatically fed through the system without further human intervention, thereby accelerating transaction cycles and reducing the possibility of human error in subsequent data entry phases.

This is a managed services-led strategy which combines Logica’s cross-industry market infrastructure project experience, its managed services capabilities, and an investment in new business partnerships in both financial markets and retail banking core systems.

Each of these strategies is supported by a combination of business consulting, ‘‘best-of-breed’’ software applications, Logica’s own intellectual property, systems integration, and managed services. Many of these capabilities and solutions are being successfully implemented in Logica’s other target markets in telecommunications and utilities. Solving the consequences of the ‘‘e’’ world requires an end-to-end change in business strategy, process, culture, organization, and systems by the financial services industry. This change is focused on four main objectives, each of which requires a unique combination of business consulting, best-of-breed business applications, advanced communications and technology integration skills, and managed operations services.

» Making the customer visible – building and managing customer profiles in real time, targeting specific customer relationship objectives, integrating and activating channels to deliver these objectives, and empowering customers to co-manage their relationship, through the increased transparency of information and processes, and spearheaded by the increasing use of personal channels.

» Making fulfillment immediate – refining the order-to-fulfillment processes, providing direct access to information and markets, removing the manual intervention required between product silos and front/back office through intelligent routing, and improving the operations’ performance through managed services.

» Making doing business convenient – putting portable banking, information, and added-value services into the hands of customers using wireless technology.

» Making the transaction real – providing the appropriate, reliable, value priced, secure payments infrastructure, trade finance service, and trust to support the settlement of inter-bank, businessto- business, and business-to-consumer transactions – across any network, anytime, anyplace.

Implementing straight-through processing (STP) – Cap Gemini Ernst & Young

Straight-through processing (STP) has been a topic of discussion within the securities industry for at least the last decade. Several initiatives and organizations have sprung up, all aimed at providing a solution to what appears to be one of the industry’s greatest inefficiencies: connectivity and continuity . STP aims to enable the business cycle of securities trading to be completed – from order inception to settled and cleared trade – on the principle of single data entry at deal capture. In theory, achieving a standardized messaging structure across the global markets is easily within the realms of today’s technology, but STP is easier to conceptualize than to accomplish. This is because the imposition of standards is elusive – the internal and external disparity of standards, the internal and external politics across business and geographic domains, and the inertia that is often a symptom of misguided protectionism all contribute to difficulty in realizing an environment that supports the STP concepts.

STP is not a new concept. In fact it is a much hackneyed phrase that has lost a lot of its glamour, as financial institution after financial institution has tried to implement an STP strategy but has had at best limited success due to a combination of issues surrounding legacy systems or changes in market infrastructure. To some financial institutions, STP has become something of a Holy Grail. Unfortunately, the business drivers for STP have not gone away, and short of outsourcing the entire transactional processing lifecycle to an IT partner, the financial institution has to face up to its STP requirements. One success story relates to Cap Gemini Ernst & Young, and a large international bank that has major operations in New York and Toronto and smaller operations in London, Hong Kong, Singapore, Japan and Australia.

The challenge was that the client’s securities businesses needed to assess the impact of moving to T + 1 settlement in North America. The client’s goal was to have a comprehensive T + 1 assessment completed early, in order to ensure adequate time to plan, leverage strategic opportunities, and use internal resources to minimize overall program expenditures.

The bank asked Cap Gemini Ernst& Young to provide a methodology for its assessment and to provide subject matter expertise in T + 1, STP, and capital markets. The bank was also interested in ensuring that the assessment was appropriately scoped by line of business and front/middle/back office to ensure that all the impacts of moving to T + 1 settlement were identified.

Cap Gemini Ernst & Young used its ‘‘accelerated assessmentmethodology’’ to review the technology, processes, and people affected by implementation of T + 1. Used previously for both Y2K and the Euro, the methodology uses a questionnaire approach to identify T + 1 impacts. Senior management in the bank’s various lines of business completed the questionnaires. The impacts were then validated and clustered into projects at facilitated workshops. Project priorities, efforts, stakeholders, and sponsors were also identified during these sessions.

The outcome was that Cap Gemini Ernst & Young delivered to the bank a comprehensive list of projects necessary to prepare for T + 1. These projects were ranked by priority and sequenced by the effort required. Impacts (i.e. requirements), sponsors, and stakeholders were identified for each project. The list of projects was also signed off by the various lines of business to ensure consensus on the direction of the program.

An ancillary benefit from the project was a significant increase in the organizational awareness of T + 1 and its associated impacts on the bank. This improved awareness and, along with the broad involvement in the assessment work, improved the priority assigned to the T + 1 program within the organization.

Defining Standards – Straight-Through ProcessingMarkup Language (STPML)

The Straight-Through Processing Markup Language (STPML) is ‘‘an XML message specification designed for the financial securities trading industry to meet the requirements of straight-through processing.’’ STPML was developed by representatives from Microsoft, FMC, Merrill-Lynch, CSS, FIX, Infinity, Bridge, ILX, NASD, and Reuters. Conceived as a superset of FIX, SWIFT, ISITC, and DTC ID, STPML can support virtually every industry standard data exchange format. The GSTPA model of the full trade cycle was used as the basis for the set of messages defined by STPML.

These messages are enhanced by other common transaction messages and a separate set of messages for the exchange of market data is defined as the Market Data Markup Language or MDML. The first demonstration of XML-based straight-through-processing was performed at the SIA conference in June of 1999 when FMC, CSS, Infinity, and Microsoft teamed up to demonstrate the entire trade cycle automated using STPML.

Most people will tell you that STP involves the proper use of standards. If that statement is true, then where does XML fit in? It fits into two key areas:

1 improving existing standards like FIX and SWIFT; and

2 creating new standards like FpML.

In the securities industry, we already have overlapping standards and the community is extremely interested in standards convergence and interoperability.With XML, there is the potential for further divergence of standards instead of convergence, as it is necessary to ask counterparties about their standard and the syntax of the standard they are using (XML or EDI). This group is being formed under the International Organization for Standardization (ISO) as the ISO 15022 XML Working Group (WG 10).

One key area of focus will be business modeling techniques in the standards process. Modeling, which offers a syntax-neutral approach to standards development, is already being utilized by organizations like ebXML, HL7, GSTPA, and SWIFT.

The mission of the group is to evolve ISO 15022 to permit migration of the securities industry to a standardized use of XML, guaranteeing interoperability across the industry and with other industry sectors, particularly but not restricted to the financial industry. This ISO 15022 XML Group consists of a Steering Committee and three project teams that address specific issues. The current project teams include Reverse