ISSA: ISO 20022 adoption limited to regulatory mandates, and comes at a cost

ISSA released the results of a survey on ISO20022 adoption and found consistent results across all segment respondents, which were banks, financial market infrastructures and technology providers.

Where there has been adoption, it’s been driven by regulatory decisions:

  • Shareholder Rights Directive II (SRDII);
  • regulatory reporting, such as Central Securities Depositories Regulation (CSDR) and Securities Financing Transactions Regulation (SFTR);
  • market infrastructure adoption, such as TARGET2-Securities (T2S) or The Depository Trust & Clearing Corporation (DTCC); or
  • changes to address a feature not covered by ISO 15022, such as proxy voting/general meetings

Even though T2S uses ISO 20022, it’s not often used between the CSD’s users at the local market level. Current adoption levels of ISO 20022 are relatively low when compared to ISO 15022 – recent figures from SWIFT show that ISO 15022 accounts for two-thirds of the total securities traffic exchanged over its network and of the 6,000 securities participants who use SWIFT today, less than 300 use ISO 20022, whilst in some markets and segments ISO 20022 is not used at all.

Key notes

  • Adoption of ISO 20022 data model in securities markets could help bridge the old world with the new.
  • Under existing trajectories and planned developments, ISO 20022 will not become the preferred standard within the next 5 years.
  • Industry participants are only adopting ISO 20022 when they have to rather than as a strategic choice.
  • There is no global business case to migrate to ISO 20022, each firm’s business case depends on its individual strategy, systems, market infrastructure requirements and customer needs.
  • Interoperability is a key feature which the securities market must enable, for the good of the whole market and not expect client demand to be the driving force.
  • There is little support for a migration plan with a timeline of fewer than 5 years. ISSA members need to prepare for prolonged co-existence.
  • Although there is a clear level of support and opportunities for adoption of the ISO 20022 standard, there is also a need to focus on resolving some of the barriers that exist to both encourage a path towards greater adoption and gain wide industry support.

Read the full report

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