TWIST an update.
Tom BuschmanDevelopment Manager
We ask Tom Buschman, who is leading the TWIST industry standard
initiative, for another update on its progress.
We asked Tom Buschman, Shell Treasury Centre Development Manager
and leading the TWIST industry standard initiative, to provide an
update on this integration standards initiative, which is formed by
many influential market players in the FX marketplace.
Both banks and their clients have an interest in ensuring a
financial market place, which allows its participants to transact
efficiently and with low operational risks. In particular foreign
exchange (FX) and cash market instruments are commodity products,
transacted in fragmented markets with a need to connect many
liquidity providers at various locations and their clients.
Further, considerable human intervention is required for the
initiation, execution, confirmation, netting and settlement of the
transactions concerned. Where transacted amounts can be high and
urgent processing often is required, controls need to be very
strict around both execution and settlement.
Without commonly agreed standards, no
individual trading platform, matching system, system vendor or bank
can lay claim on providing effective straight through processing to
Efficiency through the use of market
Confirmation matching services and payment services have
contributed to the automation of the settlement processes between
banks and their clients. The emergence of web-based trading
platforms has added the capability of automating the front-end
trade execution. Yet the integration of such market infrastructures
(trading platforms, matching services and payment services) has
until recently not been based on fully efficient and controlled
interfaces. It requires several interfaces between these market
infrastructures and market participant credit management systems,
risk management systems, pricing systems and back-office systems to
automate the communication between market participants throughout
the trade lifecycle. Where multiple banks, multiple market
infrastructures and multiple vendors are involved, an agreement on
the process flows and agreements on standards for these interfaces
is essential to ensure a truly efficient and controlled market
place. Without commonly agreed standards, no individual trading
platform, matching system, system vendor or bank can lay claim on
providing effective straight through processing to its clients.
TWIST standards initiative.
It is the objective of TWIST, the Treasury Workstation Integration
Standards Team, to deliver non-proprietary integration standards to
facilitate an efficient, controlled and open electronic dealing
marketplace for financial instruments. It is a not for profit
financial market working group, which focuses on the integration
between electronic trading platforms, back office systems, payment
systems and risk management / reporting systems. TWIST is a unique
coalition formed and led by the treasury operations department of
Shell that for the first time has brought together representatives
of over 30 leading corporates and fund managers, banks, electronic
trading platforms, consultancy firms, providers of treasury
workstation solutions and clearing institutions. TWIST is open to
market participants and service providers, irrespective of their
size or role in the market place. The existing group of members
clearly reflects this openness.
Effective straight through
The work of TWIST is based on the concept of effective
straight-through processing (STP). With effective STP, a treasury
of a fund or corporate needs to input a deal only once. The
transaction information will flow between a platform and the
treasury management system, right through the trade life cycle of
initiation, execution, confirmation, netting and settlement. It
will also feed automatically any risk management and accounting
processes. A controlled process of STP will ensure that high value
and urgent transactions are processed at minimal operational risk.
Preventative controls can be incorporated in the dealing process,
validating transactions at the moment of execution instead of at
the moment of its confirmation and settlement. Secure communication
between client back-offices and operation departments of banks can
enable the netting of positions and netting of settlements. The
connection to payment processes can be improved with the use of
more secure interfaces and improved communication protocols.
Finally, direct links between their trading and settlement process
and reporting systems allow both banks and their clients to achieve
efficient and effective monitoring of positions and assessment of
Reasons for TWIST to drive the
development of market standards.
Historically, each electronic trading platform, banking system and
treasury management system is built to its own specifications, and
connecting them requires costly customised interfaces. The obvious
solution is to have a single set of standard interfaces that all
parties could implement, simplifying systems integration and
allowing corporates greater choice of platforms, treasury
management systems and banks. The development of such single
standard interfaces requires close co-operation between various
market players with different interests. Where banks and software
vendors were driving towards proprietary solutions, and existing
standards organisations were not in a position to avoid a further
proliferation of practices, pro-active action was required in the
beginning of 2001. This has led to the creation of TWIST.
TWIST approach and relationship with
other standard initiatives.
Close co-operation between competing service providers (software
providers and banks) requires an approach, which creates win-win
situations for all involved. Core to this approach is the focus on
qualitative, open and non-proprietary standards that do not require
major efforts by software vendors and that are applicable for large
as well as smaller organisations with limited resources but similar
Incorporation of valuable work done by vendors, banks and other
standards organisations ensures wide applicability and acceptance.
Further, close co-operation of TWIST with FpML, SWIFT and other
standard initiatives ensures alignment, avoids duplication and
confusion and speeds up TWISTs own efforts to drive straight
through processing. Within this context, TWIST has established
early 2001 a close relationship with FpML (Financial products
Markup Language), a standards organisation set up by major banks.
TWIST has also been working closely with S.W.I.F.T., the
international banking messaging and network co-operative, sincethe
summer of 2001. By effectively bringing together various industry
players and seeking a complementary approach, TWIST has gained the
momentum needed to design the various standards required and ensure
acceptance by key market participants.
TWIST and its results.
TWIST issued the first version of the treasury system interface
standard in May of 2001. In September 2001 it published on its
website www.twiststandards.org its second version. The published
specifications for open standard interfaces at present include
detailed instructions for foreign exchange trading, incorporating:
trade and settlement confirmations; new trades; collections of
trades; amendments; cancellations; allocations; rolls;
aggregations; split settlements.
TWIST standards are designed based on an analysis of the process
flow of transactions. The following process components have been
Set up trading relationship
Trade execution and trade confirmation
For each of these process components, sub-processes can be
identified (see graph). For all sub-processes, the TWIST group has
defined the neces
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