SECURITIES - STRAIGHT THROUGH PROCESSING

Application Overview

The T24 Securities Straight Through Processing Module (SP) has been designed to achieve Straight
Through Processing (STP) with the set of ISO 15022 messages introduced by SWIFT. Straight
Through Processing is the next step in evolution of Banking systems for the securities industry.

ISO 15022

ISO 15022 is the new messaging standard introduced by SWIFT for Securities Industry. It has been
introduced in response to market demand for Straight Through Processing. It replaces the previous
standards ISO 7775 –Scheme for Message Types and ISO 11521 – Scheme for interdepository
message types. ISO 15022 series of messages will replace ISO 7775 series of messages from
November 2002 onwards. The introduction of ISO 15022 series of messages facilitates a T + 1
(Trade date + 1) settlement scenario.
SECURITIES - STRAIGHT THROUGH PROCESSING

Application Design

Parameter Files

SP.STP.PARAM

SP.STP.PARAM is the parameter file for driving Straight Through Processing (STP) functionality.
SP.STP.PARAM facilitates in controlling STP in separate components. The components of STP
will be the SWIFT messages, which are controlled by the Securities Straight Through Processing
Module. All the components of STP are to be selected if a full STP system is to be installed. As
there might be a requirement for partial STP (E.g. Settlement will be controlled through STP and
Order processing will be done manually), the SP.STP.PARAM can be set up accordingly to suit the
business requirement.

The id of SP.STP.PARAM will be the company id. Each company will have a separate parameter
record.

OFS.SOURCE

An OFS.SOURCE record is to be set up as follows. This OFS.SOURCE record defines the

IN.QUEUE.DIR and OUT.QUEUE.DIR and the IN.DIR.RTN.

Figure 1 - OFS.SOURCE
EB.PHANTOM

An EB.PHANTOM record is to be set up as follows.

Figure 2 - EB.PHANTOM

SC.PARAMETER

SC.CLASS.TYPE and EB.CLASS.TYPE fields in SC.PARAMETER are to be filled as shown in the

screen shot.

Figure 3 - SC.PARAMETER

SC.CLASS.TYPE is the internal class used in the Securities module. SC.CLASS.TYPE and
EB.CLASS.TYPE provide the CLASS mapping between internal securities class and
EB.MESSAGE.CLASS. EB.CLASS.TYPE allows a valid EB.MESSAGE.CLASS record to be input.
The EB.MESSAGE.CLASS must be used in the EB.ADVICES record.

This facilitates in adding new mapping records locally for each activity.

With the above set up all the inward messages will be processed and the respective applications will
be updated and authorised.
SECURITIES - STRAIGHT THROUGH PROCESSING

Overview of Input and Processing

Straight Through Processing Messages

The following are the messages that are handled in the Straight Through Processing Module.

MT 502 Order to Buy or Sell

This message is primarily used for placing an order to Buy or Sell to the Broker. This message will
be generated from SEC.OPEN.ORDER application. This message uses the SOFT DELIVERY
method for processing deliveries. MT502 will be generated if MSG.TYPE field is SP.STP.PARAM is
set to “502”. Introduction of Soft Delivery facilitates in preview of the SWIFT message in
unauthorised status. The Delivery Preview Icon that is available in Desktop triggers the preview of
a MT502 message.

Figure 4 - Preview of an MT502 Order to Buy or Sell

The CARRIER (SWIFT) can be overridden at the contract level. The SWIFT address of the
BROKER can be input/overridden in the order application.
 Figure 5 – SEC.OPEN.ORDER Soft Delivery

MT502 Order to Buy or Sell has three functions. The functions of MT502 is classified as:

NEW MESSAGE A new order is placed to the Broker

REPLACEMENT The existing order with the Broker is modified
CANCELLATION The existing order with the Broker Is Cancelled

All the above three functions are defined as different activities in T24. An example of a New
ORDER is given below-

Figure 6 - MT502 - New Messages

Once an MT502- New message is generated no fields other than NO.NOMINAL and AMT.TO.BROKER
will be allowed to be changed in SEC.OPEN.ORDER. The change to NO.NOMINAL and
AMT.TO.BROKER will trigger a MT502 Replacement message. An example of an MT502
Replacement is attached below.
 Figure 7 - MT502 Replacement Message

Reversal of SEC.OPEN.ORDER and deletion of a Broker multi value set will generate a MT502
Cancellation message. An example of an MT502 is attached below.
 Figure 8 - MT502 Cancellation Message

When an MT502 Replacement or Cancellation is sent, the same is to be Accepted or Rejected by

the Broker with an MT509 Trade Status Message. To facilitate this functionality two Live files have
been introduced to record the Replacement and Cancellation Details.

SP.ORDER.DELIVERY.CONTROL

When a SEC.OPEN.ORDER is modified or cancelled then a live file

SP.ORDER.DELIVERY.CONTROL is updated. This Live file holds the details of modification made
to the AMT.TO.BROKER and it effect on the Customers NO.NOMINAL fields in SEC.OPEN.ORDER.

Figure 9 - SP.ORDER.DELIVERY.CONTROL

SP.ORDER.STP.ACTIVITY

This Live file is updated when an MT502 replacement or cancellation is sent. This Live file will
denote the status of an MT502 replacement or a Cancellation sent. If the BR.MSG.STATUS field has
a value “LIVE” then there is no MT509 pending from a BROKER. If BR.MSG.STATUS is “null”
then an MT509 Trade status message is expected from a Broker. If the status is “ACCEPTED” or
“REJECTED” then the MT509 is received from the respective Brokers and the update to
SEC.OPEN.ORDER is pending.
 Figure 10 - SP.ORDER.STP.ACTIVITY

MT 509 Trade status message

This message is designed as an inward message in T24. An MT509 will be processed only if the
MSG.TYPE field in SP.STP.PARAM is set to “509”. This message will be processed by a phantom
defined in EB.PHANTOM. An MT509 Trade Status Message can be used in T24 for receiving the
status of previously sent MT502 replacement or cancellation. The status advised in MT509 can be
ACCEPTED or REJECTED. Depending on the status advised, action would be triggered. If an
MT502 Replacement/Cancellation is rejected by an MT509, then SEC.OPEN.ORDER is to be
modified accordingly. The AMT.TO.BROKER field for the respective Broker is to be modified
suitably.

When AMT.TO.BROK field in SEC.OPEN.ORDER is modified the customer NO.NOMINAL also has
to be modified. The modification details are stored in the SP.ORDER.DELIVERY.CONTROL
application. When a MT509 advises Acceptance or Rejection the same is recorded in
SP.ORDER.STP.ACTIVITY. Until all MT509 is received, SEC.OPEN.ORDER and
SC.EXE.SEC.ORDERS will not be allowed for modification.
Constraints

SP.ORD.MANUAL.UPD

In case if SEC.OPEN.ORDER is to be modified or an execution is to be input then the

SP.ORDER.STP.ACTIVITY must be set to “LIVE” in BR.MSG.STATUS for all the Brokers. This
can be achieved/simulated manually through an application SP.ORD.MANUAL.UPD.
 Figure 11 - SC.ORD.MANUAL.UPD

In SC.ORD.MANUAL.UPD the respective BROKER number from whom the MT509 is pending
can be Input and the Accepted or Rejected status can be manually input. This will update
SC.ORDER.STP.ACTIVITY and trigger the necessary changes.

MT 513 Client Advice of Execution

This is an inward message, which will be processed in T24. An MT513 will be processed only if the
MSG.TYPE field in SP.STP.PARAM is set to “513”. This message will be received from a Broker to
whom previously an MT502 Order to Buy or Sell is sent. This message will advise execution of the
order in full/partial. This message will be processed by a phantom job defined in EB.PHANTOM.
Currently T24 will process only advice of execution (NEW Message) and will not process a
cancellation of execution.

This message will update SC.EXE.SEC.ORDERS with the execution details received from the
Broker. The following fields in SC.EXE.SEC.ORDERS will be updated from the MT513 received
from the Broker.

BROKER.NO
NOMINAL.RECD
PRICE

Screen shot of MT513 Client advice of execution is shown below.

MT 514 Trade Allocation Instruction

This is an outward message from T24. MT514 will be processed only if MSG.TYPE field in
SP.STP.PARAM is set to 514. This message is sent to the Broker for each allocation made out of the
execution MT514. The Trade allocation message will carry one allocation only at a time, hence
there would be multiple MT514’s generated from an execution (MT513). Each MT514 Trade
Allocation Instruction will have the SEC.TRADE id as reference.
Trade allocation instructions will be sent only if the TRADE.CREATION field in
SC.EXE.SEC.ORDERS is set to “BY PORTFOLIO”. A screen shot of an MT514 is shown below.

MT 515 Client Confirmation of Purchase or Sale

MT515 is an inward message from the Broker advising confirmation of purchase or sale for each
MT514 previously sent. An MT515 will be processed only if MSG.TYPE field in SP.STP.PARAM is
set to “515”. This message will be processed by a phantom in the EB.PHANTOM record. The
phantom job will process MT515 and authorise the respective SEC.TRADE.

MT 544 Receive free confirmation

This is an inward message to be processed in T24. An MT544 will be processed only if the
MSG.TYPE field in SP.STP.PARAM is set to 544. This message will be received from the
depository to whom a MT541 Receive free is sent. This message will confirm the receipt of stock in
full/partial from the respective Broker with whom the Trade have been done.

An MT544 will advise receipt of stock, the same is to be recorded in SC.SETTLEMENT application.
The BR.NOM.RECD.DEL and CU.NOM.RECD.DEL fields in SC.SETTLEMENT will be populated with
the settled nominal advised in MT544. As SEC.TRADE allows multiple customer and multiple
brokers at the same time, receipt of stock from a respective broker will be marked. Similarly the
nominal received/settled by the broker is to be prorated among the customers. This process of
prorating customer nominal against settled nominal from broker is handled in MT544 inward
processing.

Though Actual settlement method is assumed for Straight Through Processing, entities would settle
the Customer/Broker’s Cash/Nominal contractually. This method of partial contractual settlement
or partial actual settlement can be handled in T24. In Straight Through Processing if the contractual
settlement method is used partially (E.g. Customer Cash and Nominal will settle contractually) then
the processing of the Settlement Confirmation messages become complex.

MT544 inward processing handles this complex situation and would settle Broker/Customer
nominal appropriately. Any error or inability to update to SC.SETTLEMENT will be recorded in an
exception log.

MT 545 Receive against payment confirmation

This is an inward message to be processed in T24. MT545 will be processed only if the MSG.TYPE
field in SP.STP.PARAM is set to 545. This message will be received from the depository to whom
an MT542 Receive against payment is sent. This message will confirm the receipt of stock in
full/partial and Payment in full/partial from/to the respective Broker with whom the Trade have
been done.

MT545 will advise both receipt of stock and payment made to a broker, the same is to be recorded
in the SC.SETTLEMENT application. The BR.NOM.RECD.DEL and CU.NOM.RECD.DEL fields in
SC.SETTLEMENT will be populated with the settled nominal advised in MT544. Similarly
BR.AMT.RECD.PAID and CU.AMT.RECD.PAID fields in SC.SETTLEMENT will be recorded with
the payment made to the Broker. As SEC.TRADE allows multiple customer and multiple brokers at
the same time, receipt of stock from a respective broker will be recorded. Similarly the nominal
received/settled by the broker is to be prorated among the customers. The cash to be paid to the
broker will be recorded in SC.SETTLEMENT. In turn the cash settlement from the customer will
also be recorded. This process of prorating customer nominal against settled nominal from broker
and prorating cash amounts is handled in MT545 inward processing.

Though the Actual settlement method is assumed for Straight Through Processing, entities would
settle the Customer/Broker’s Cash/Nominal contractually. This method of partial contractual
settlement or partial actual settlement can be handled in T24. In Straight Through Processing if
contractual settlement method is used partially (E.g. Customer Cash and Nominal will settle
contractually) then the processing of the Settlement Confirmation messages become complex.

MT544 inward processing handles this complex situation and would settle Broker/Customer
nominal appropriately. Any error or inability to update to SC.SETTLEMENT will be recorded in an
exception log.

MT 546 Deliver free confirmation

This is an inward message to be processed in T24. MT546 will be processed only if the MSG.TYPE
field in SP.STP.PARAM is set to 546. This message will be received from the depository to whom a
MT542 Deliver free is sent. This message will confirm the receipt of stock in full/partial from the
respective Broker with whom the Trade has been done.

MT546 will advise delivery of stock, the same is to be recorded in the SC.SETTLEMENT
application. The BR.NOM.RECD.DEL and CU.NOM.RECD.DEL fields in SC.SETTLEMENT will be
populated with the settled nominal advised in MT546. As SEC.TRADE allows multiple customer
and multiple brokers at the same time, delivery of stock to a respective broker will be marked as
received in the MT546 Deliver free confirmation. Similarly the nominal delivered/settled to the
broker is to be prorated among the customers. This process of prorating customer nominal against
settled nominal from brokers is handled in MT546 inward processing.

Though Actual settlement method is assumed for Straight Through Processing, entities would settle
the Customer/Broker’s Cash/Nominal contractually. This method of partial contractual settlement
or partial actual settlement can be handled in T24. In Straight Through Processing if contractual
settlement method is used partially (E.g. Customer Cash and Nominal will settle contractually) then
the processing of the Settlement Confirmation messages become complex.

MT546 inward processing handles this complex situation and would settle Broker/Customer
nominal appropriately. Any error or inability to update to SC.SETTLEMENT will be recorded in an
exception log.

MT 547 Delivery against payment confirmation

This is an inward message to be processed in T24. MT547 will be processed only if MSG.TYPE field
in SP.STP.PARAM is set to 547. This message will be received from the depository to whom a
MT543 Deliver against payment instruction is sent. This message will confirm the delivery of stock
in full/partial and Payment received in full/partial from/to the respective Broker with whom the
Trade has been done.

MT547 will advise both delivery of stock and payment received from the broker, the same is to be
recorded in the SC.SETTLEMENT application. The BR.NOM.RECD.DEL and CU.NOM.RECD.DEL
fields in SC.SETTLEMENT will be populated with the settled nominal advised in MT547.
Similarly BR.AMT.RECD.PAID and CU.AMT.RECD.PAID fields in SC.SETTLEMENT will be
recorded with the payment received from the Broker. As SEC.TRADE allows multiple customer and
multiple brokers at the same time, delivery of stock to a respective broker will be recorded.
Similarly the nominal delivered/settled to the broker is to be prorated among the customers. The
cash received from the broker will be recorded in SC.SETTLEMENT. In turn the cash settlement to
the customer will also be recorded. This process of prorating customer nominal against settled
nominal to broker and prorating cash amounts is handled in MT547 inward processing.

Though Actual settlement method is assumed for Straight Through Processing, entities would settle
the Customer/Broker’s Cash/Nominal contractually. This method of partial contractual settlement
or partial actual settlement can be handled in T24. In Straight Through Processing if contractual
settlement method is used partially (E.g. Customer Cash and Nominal will settle contractually) then
the processing of the Settlement Confirmation messages become complex.

MT547 inward processing handles this complex situation and would settle Broker/Customer
nominal appropriately. Any error or inability to update to SC.SETTLEMENT will be recorded in an
exception log.