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Closing the gap to STP
CSFB Transaction Services Solutions & virt-x

The financial services industry is constantly changing. CSFB is dedicated to serving financial institutions and empowering their businesses through world-class banking products and services. Our role is to look ahead, develop new services and advance existing ones in order to enable our clients to leverage these changes.

Enter "virt-x", the revolutionary electronic exchange and trading platform.
June 25, 2001 was an important day for CSFB and for the Swiss capital market in general; it marked the launch of the Swiss-UK joint securities market "virt-x". With its introduction, participants were able to shift their trading focus from a domestic to a pan-European view. Using this single common platform it is now possible to trade some 650 pan-European blue chips from 17 markets that are quoted in six different currencies.

Virt-x took a best of breed approach to building its infrastructure. Tradepoint, based in London and regulated by the FSA, provides the legal structure, with SWX providing the underlying technology. The result is a single trading platform that allows the entire trading-settlement value chain to be fully leveraged, resulting in highly efficient processes at low cost.

One-way processing for lower cost and higher efficiency in the settlement of virt-x trades.
One-way processing is a primary advantage of the business flow for the settlement of virt-x traded transactions. The chart in figure 1 (below) shows how locked-in "master" trade data flows within seconds from virt-x to SECOM and on to CSFB for immediate notation as a pre-booking in the customer account. CSFB holds sub-accounts for customers at SIS, which they use to check balances and effect settlement. Upon settlement, SIS sends the definitive settlement confirmation to CSFB. CSFB , in turn, sends an MT 53x confirmation back to the customer.

Higher efficiency means less processing complexity. Settlement efficiency rates for traditional SWIFT custody processing range from 80% to 90%. Settlement efficiency rates for virt-x on-exchange transactions exceed 99.8%, offering a decisive advantage in minimising transaction costs. Moreover, the virt-x model reduces transaction complexity. Because clients receive trade confirmations directly from virt-x, these can be used to pre-note transactions until the MT 53x is received from CSFB , making the costly and complex step of MT52x matching redundant and obsolete. In practice, this means it is no longer a requirement for clients to send "slave" SWIFT data confirmations to CSFB to complete the settlement process.

However, as a special option we offer clients the possibility to send us MT52x instructions for virt-x transactions that will be matched against the virt-x master data. In all cases of unmatched trades from the customer, the master data prevails. In the case of a matched trade-ID and different content, the master data prevails. Late or duplicate client confirmations will be rejected and communicated to the client.

Figure 2, above, shows how the flows of virt-x transactions compare to those coming from other markets.

 

Active involvement.
CSFB is a major market maker and user of the system. We were one of the founding members and early adopters of virt-x. We believe that there is enormous potential for increasing efficiency and reducing costs across the whole order-execution-settlement cycle. This belief drove our decision to offer a fully automated settlement service to virt-x members from day one. Initial experience has supported our belief in this service. Both we and our clients have been able to enjoy a problem-free settlement environment.

The future is...clear.
With its status as a General Clearing Member (GCM) of London Clearing House (LCH), x-clear will offer its members - such as CSFB - an interface to LCH and access to the service. CSFB has already started projects to prepare for the upcoming changes and to offer clearing and settlement services to its clients.

GSTPA.
CSFB was a founding member of GSTPA, an industry initiative designed to facilitate the cross-border settlement of securities transactions. GSTPA captures the post-trade / pre-settlement information flow between the investment manager, the broker/dealer, and the global custodians. This offers the potential for a massive decrease in turnaround times, as well as improved STP rates. GSTPA is an essential pre-requisite for the industry to move to T+1 settlement. Credit Suisse Group has committed itself as a pilot in all three areas: investment management (Credit Suisse Asset Management), brokerage (SASI-Swiss American Securities) and custody (CSFB ).

TSS - Payments
CSFB is one of the leading domestic clearing banks in Switzerland. Credit Suisse was a founder member of SIC (Swiss Interbank Clearing), the first RTGS payments system in the world, as well as of EuroSIC, the Swiss Euro clearing system. Our expertise stretches beyond Swiss francs. Supporting our private banking businesses and other Credit Suisse Group companies requires us to operate an extensive nostro network in over 50 currencies. We already offer correspondent banking services in over 30 currencies. This is the multi-currency experience and processing capability that has served as the foundation on which we have developed our CLSTM capabilities.

TSS - CLSTM-Continuous Linked Settlement

Industry Initiative.
In response to the 1996 call from the Bank for International Settlements (BIS) to reduce cross-border settlement risk, a group of leading institutions came together and produced the concept for CLSTM. It has taken several years to come to fruition, but CLSTM is now an impending reality. There should be no doubt that CLSTM will have a significant impact on the operations of all the FX market participants that use it. CLSTM offers the chance to eliminate settlement risk via a payment-versus-payment mechanism and in doing so to meet the goal set out by the world's regulators.

Commitment.
CSFB is committed to being a leading provider of CLSTM-related services. We will be a liquidity provider in Swiss francs to other Settlement Members and to CLSTM Bank. In addition, we have developed a series of products to support access to CLSTM for non-members, known as Third Parties.

Innovation.
Third Party services will range from a standard suite of CLSTM accounts for the initial seven currencies, to the provision of full nostro and payment services in CLSTM and all other currencies, to a completely serviced FX back-office where we act as a settlement agent, providing matching and settlement for clients. CSFB has developed its tools to ensure that clients have full control over their transactions at all times. Our approach to technology means that clients can minimise the costs of changing their own systems. Execution is an integral part of our offering. CSFB is unique in offering a CLSTM service that provides seamless integration with an on-line FX execution tool, PrimeTradeFXSM.

Flexibility; one size does not fit all.
There is no single CLSTM solution that meets everybody's needs. Understanding needs and selecting solutions requires dialogue. CSFB is committed to a partnership with its clients that ensures a successful long-term relationship.

TSS Relationship Management

Trust.
Trust, the core of any lasting relationship, is based on experience, know-how and understanding. We cannot trust what we do not know and what we do not believe in. At CSFB Transaction Services & Solutions, we strive to provide our clients with excellence in technology and service, providing the information that enables them to make well-informed decisions and plan for the future.

Dedication.
Each client is assigned a relationship manager who will work with him to understand the specific business and working environment and ensure that the right set of tools are in place to best meet that client's needs. Relationship managers are bankers themselves with a comprehensive knowledge of our services as well as of the industry and are available to help clients find the best fit and mix of tools and services.

Feedback.
Relationship Managers work together with clients to help tailor a specific offering to fit their needs. Feedback helps us to understand better how to focus on the right client issues and most appropriately improve our products.

TSS - Banking@CSFB

Access and Control.
Finally, CSFB is developing a single unified online platform that will allow you to access all TSS products and services through a standard browser. Specialised tools give you maximum control over your account processing in each of the TSS areas: Custody, Payments and CLSTM. For example, through Banking@CSFB, clients can access Settlement Scorecards such as shown in figure 3 for both Custody and CLSTM. CSFB 's CLSTMHub can immediately identify exception trades and offers an alerts service, giving clients the option to receive alerts via email, mobile telephone or PDA. The alerts service can also be used to communicate specific client-determined information requirements such as exceeded credit or balance limits. Exceptions can be easily found online in the summary reports and drill-down functions give clients the transparency to view directly the most detailed level of transaction data. SWIFT messages can be accessed at all levels. CLSTM Third Party clients benefit from maximum control through constant real-time information on all CLSTM-related trades. With an enhanced service, they will be able to monitor and manage account balances for all FX transactions.

Access Management and General Information.
The Access Management area is where administrators can centrally manage application access rights for their users. This area also covers general administrative issues such as "change password" or "administrate subscriptions" and gives the administrator access to client contracts and agreement data. The General Information area includes tabs where you can access newsletters, a list of cut-off times, the CSFB SWIFT Formatting Guidelines, Interbank Interest Rates and a listing of official Swiss and international Bank Holidays.

Banking@CSFB security.
Banking@CSFB uses the highest international security standards. We employ a three-tier architecture, physically and logically segregating entry, authentication and application servers.

Written by the TSS Editorial Team

Contact
For more information on how you can benefit from the TSS offering, contact your TSS representative.

Robert Jurt in Zurich
tel: +41 1 333 32 13 or
email: robert.jurt@csfb.com

Colin Nutt in London
tel: +44 20 7888 8119
email: colin.nutt@csfb.com

Custody/Securities services:
Markus Bhend in Zurich
tel: +41-1-333 69 09
email: markus.bhend@csfb.com

 

 

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New Millennium
STP changes
Operational efficiency
Global Straight
The road to T+1
Closing the gap
financial services
CLS and Liquidity
STP: Within and Between
STP - seeing the light
Some case studies
Reducing operational risk
Not Easy!!
Hidden barriers
Thinking Panaceas
Less hype!
End to End
T+1 on Hold

 
 
 

 

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