The International Securities Services Association (ISSA) published a report that assessed: the use of application programming interfaces (APIs) and focal areas for in terms of both functional and counterparty interaction and the level of investment; the business drivers for APIs focus and areas of opportunity in corporate actions (CA) flows; further insights around different approaches that the industry could take to accelerate adoption and standardization, if this is the core recommendation.
ISSA made recommendations based on a review of APIs and the case for ISO 20022. These are:
- To focus on the channel between global custody and local custody in terms of pushing new standards. This is the area with the most alignment of data models and processes is therefore a good area to accelerate the take-up and buy-in to standard APIs.
- That firms should also engage with their asset manager clients to raise awareness of this initiative and generate buy-in from all stakeholders.
- The industry conducts a formal data driven review of CA lifecycle to understand areas that need improvement, that are problematic and the underlying reasons for this, and identify if these improvements can be addressed by API adoption.
- Market participants work on set of generic API resources that can address the majority of identified use cases especially if built using existing data models and data dictionaries such as those offered by ISO 20222
- That the industry adopts a standardized core set of APIs in the near term as the lack of standardization will add cost of maintenance and interoperability and might reduce the pace of adoption of APIs. This will require thinking through all aspects of design, maintenance and parity compliance and how it aligns with the SMPG (Securities Market Practice Group) remit.
- The industry does a review of the potential for API standards in Tax, Account Opening and FX as these are clearly new emerging areas of interest to the industry.
- API implementations should focus on areas where there are frequent exchanges of data or in areas where there are no messaging standards (that are actually used), or in areas where non-straight-through processing communications (phone calls, emails, free format messages) prevail.
- A three step questioning approach is used when building a business case for APIs: (1) what are the most pressing use cases where APIs are perhaps the best or only solution? (2) what are the tangible benefits of implementing an API? (3) What are the costs of implementation at both the client and provider sides?
Background
In June 2022 the ISSA Working Group (WG) on ISO 20022 interrogated member firms involved in the Asset Servicing and ISO 20022 WGs, assessing the benefits for the industry from adopting a more standardized approach to APIs and from using the ISO 20022 standard above other potential standards and/or data models. The WG used highly targeted use cases to explore in depth whether there is a strong business case for the industry to align on common standards for specific API components (data model, security and identity, design practices or technical features such as response codes, paging, etc.). These use cases focused on Corporate Actions given the results of ISSA’s previous papers and surveys which identified this area as an opportunity.