2002 winner | TECHNOLOGICAL DEVELOPMENT OF THE YEAR Twist

Electronic trading platforms are most useful for corporates if there is a direct connection between the platforms, their member banks and corporate treasury management systems. Corporates then need to input deals once only, and the transaction information will flow between the treasury management system and the platform, right through the trade life cycle of execution, confirmation and settlement, as well as feeding risk management, profit and loss and other analytical calculations. This straight-through processing of deals can lead to significant improvements in efficiency, and reduction of costs and operational risk.

But each platform, banking system and treasury management system is built to its own specifications, and connecting them together requires customised interfaces. This can be costly for corporates, and reduces their flexibility with regard to the platforms they use. The obvious solution is to have a single standard interface that all parties could implement, simplifying systems’ integration for everyone and allowing corporates greater choice of platforms and treasury management systems.

Cue the Treasury Workstation Integration Standards Team (Twist) led by Royal Dutch/Shell Group, which aims to create such a set of standards, initially for foreign exchange and later for other instruments. It already has nearly 20 members, including the Currenex multi-bank trading platform, Reuters, Bloomberg, Barclays Capital, PricewaterhouseCoopers and most of the major treasury management system suppliers, such as Wall Street Systems, Trema, Integrity Treasury Solutions and SAP.

Twist debuted last May with its first specification, which covered the data elements in messages for electronic forex trades. In September, it added specifications on instructions for forex trading, including trade and settlement confirmation. The specifications are based on the XML data format standard originally developed for internet applications, which has been widely adopted for e-commerce, including the Financial products Markup Language (FpML), a standards initiative for over-the-counter derivatives trading.

Twist’s efforts complement FpML, and several firms participate in both groups, such as Barclays Capital, Reuters and Wall Street Systems. But FpML is bank-oriented and focused on the front office, whereas Twist’s view is from the buy side and covers more middle- and back-office aspects, says Tom Buschman, treasury centre development manager at Shell and founder and co-ordinator of Twist.

Twist is working with FpML to integrate their standards, and has already contributed its specifications to the FpML forex products working group. Rick Schumacher, who heads the working group and is Web product development manager at Wall Street Systems, says: “Twist’s input is helping to accelerate the work we are currently doing with the FpML specification for forex products.”

Twist is also working with Swift, the international banking messaging and network co-operative, enabling it to extend its messaging from the banking environment to the buy-side.

“We need the corporates’ point of view if we want to know more about information before it enters the banks so we can include it in our [business modelling of messages],” says Carlo Palmers, head of payments and treasury standards development at Swift.

But unlike FpML and Swift, Twist is driven by the end-user rather than by the sell side. This is unusual in financial technology standards initiatives. So far, the only corporate member is Shell, although other corporates have shown interest.

David Knight, partner heading corporate treasury solutions at PricewaterhouseCoopers, says Shell is one of the few corporates big enough to push the initiative along. “Working your way through the stakeholders [in a standards process] is as much of a challenge as the technology, and Shell has the clout to do it,” he says.

Some sceptics note that Shell has a stake in Currenex, and suggest that Twist is primarily about Shell protecting its investment. While it is clearly interested in promoting Currenex’s success – and Buschman is open about Shell’s investment – Twist aims to create industry-wide standards that could be implemented by all trading platforms. He notes that organisations such as FpML, Swift and Reuters would not be working with Twist if they suspected it was just a Currenex support group.

Twist has also invited multi-bank forex portals Atriax and FXall to join, and although neither has taken up the offer so far, both say they will adopt its standards if they gain momentum in the industry.

Further evidence, if needed, that Shell is looking longer term with Twist than simply protecting its current investments in specific systems is that its present treasury management system supplier, California-based SunGard Treasury Systems, has not joined the initiative. Graham Taylor, executive product manager for SunGard’s eTreasury eXchange e-commerce integration technology, says Twist is duplicating work it has done internally. SunGard has its own XML-based formats, called Treasury Markup Language, for forex and other instruments, implemented in its products and with partner banks and brokers. “It would make no business sense to change,” says Taylor.

Twist aims to create standards to help realise the potential benefits of e-commerce, and its set-up and the undertaking of its first tasks have won the confidence and backing of key players in the industry. It has already made practical progress and is well set to make an important contribution towards straight-through processing of forex and other transactions, particularly for the buy side.
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