Messaging Infrastructure and it s role in market reform John Harvie ACORD IT Club, July 2007 Atos, Atos and fish symbol, Atos Origin and fish symbol, Atos Consulting, and the fish itself are registered trademarks of Atos Origin SA. July 2007 2007 Atos Consulting
I am here to talk about standards based messaging infrastructure» What do I mean by messaging infrastructure:» A way of connecting to all your trading counterparties where ever they are in the world.» A way of exchanging both structured and unstructured data without having to use paper.» A simple single connection for your messaging needs. Like using your mobile phone.» A low overhead for firms to support and maintain.» Interactive, file transfer, and store and forward.» Including standards validation, message validation, message translation, archiving, service levels, end-to-end security and non-repudiation.» A highly secure and extremely reliable network.» Management information about every aspect of your messaging. 2 Custom presentation- or document control name Optional chapter number (Arial 10 plain)
The market needs standards based, secure, resilient, cost effective messaging infrastructure to deliver the efficiency gains it is looking for, Why? # Without With 1 Connection - The cost of developing, maintaining and supporting multiple messaging and network layers for each of your applications is very high (Gartner estimate 20,000 50,000 per connection per year * #1 and #2 together) Simplified single connection. Messaging is a scale business. The industry needs partners with tremendous economies of scale. Think of the programmers, network engineers, project managers, administrators, hardware purchases and software licenses you can save or re deploy. 2 Integration - Multiple interfaces, multiple messaging standards and versions multiple security models, multiple network connections and so forth. To integrate all this into your applications requires serious engineering which is costly for the industry. 3 Straight though processing - The holly grail of efficiency improvement but difficult to achieve. The banks have been wrestling with it since 1996. It requires process standardisation and integration. Without a messaging infrastructure your on your own. 4 Pricing - No aggregated pricing opportunities. The price is based on your message volume alone. 5 Risk - Security and resilience down to you. You carry the risk, you carry the cost 3 Custom presentation- or document control name The industry needs a messaging infrastructure that enables us to build thin applications which plug and play into messaging infrastructure providers. The industry needs messaging infrastructure that can provide high quality standards implementation, management information, education and training coupled with effective systems integration. This is only likely to come from partners that have already helped organisations and whole sectors implement STP before. The industry needs to be able to leverage its aggregate message volume when developing pricing models. It needs discounts based on volume and for these to be reviewed annually as volumes increase. The industry needs infrastructure that has the resilience and security only available from truly enormous investment. The savings are from not losing business because you re down, or late, or lost.
If we look to other industries there are plenty of examples of what has been achieved» Its not just me saying this:» From the banking industry: - Swift estimates that it has saved USD 400 Million for the banking industry through supporting STP - At the same time Swift has been able to reduce its prices by 50% - In 200611.4 million messages per day between 8,000 trading partners in 207 countries - 1.5 million messages per day in 1991 to 11.4million in 2006» From the high tech industry Rossettanet offers: - 100% error-free forecast-to-cash procurement processes - 80% reduction in manual transactions - Inventory level reduction from 4 to 2 weeks - 78% less shipments, lowering logistics costs - Reduction in planning time from 8 to 4 weeks 4 Custom presentation- or document control name
From my perspective the 3 year vision for the world of reinsurance and large commercial risks looks like..» ACORD RLC standards fully developed.» ACORD dominant RLC standard in Europe, North America and Bermuda.» The RLC industry fully and consistently understands the process efficiency and competitive potential of electronic messaging, particularly at CEO level.» The RLC industry has the capability to exchange data electronically;» Through a combination of web applications and in house solutions that partially standardise and automate process generating and receiving messages that are exchanged with counterparties. Some STP started; With» A small number of large messaging infrastructure providers enabling counterparties across the globe to send and receive messages using cost effective, secure, resilient messaging infrastructure; That - enables interconnectivity between infrastructure providers to facilitate message exchange; and - enables firms to move at different speeds upgrading to new standards at different times; and - provides interconnectivity and standards translation services to environments where non ACORD standards are used. 5 Custom presentation- or document control name
. And consequently.» Firms take advantage of the exchange of structured and unstructured data to drive efficiency improvements into their organisations.» Firms take advantage of electronic environments to improve customer service and gain access to efficient distribution channels.» Firms are exposed to lower levels of operational risk and are therefore more capital efficient.» Significantly greater levels of management information are available on process and trading performance and the industry recognises the power of this information both as a tool for improved efficiency and competitive advantage. 6 Custom presentation- or document control name
The components necessary to implement this vision are beginning to take shape. Standards Organisation Broker and insurers business applications ACORD. Developing the standards necessary to exchange structured and unstructured data electronically. Many legacy applications that pre date ACORD but some modern ones with workflow. Now need to be ACORD and message where necessary. email Workflow solutions Broker and insurers web portals Web applications Business integration tools ACORD Gateway Messaging infrastructure Already being used extensively for electronic messaging but unstructured, insecure and difficult to manage once volume increases. Workflow enablement of business applications. Enables the enterprise to drive business process, developing outwards from core applications towards the internet. Some already in existence. Not integrated into insurers systems and underwriters have to have access to many. Not yet message enabled. An alternative to workflow enablement of your own application and to brokers portals. A way of trading without investment in your own systems but difficult to integrate into your own workflow and systems without message enablement. Tool sets with capability to introduce workflow and integrate it into the messaging environment. Pushing both into the enterprise to integrate core apps and out of the enterprise into the messaging environment. Specialist products that provide functionally rich gateways capable of sending and receiving ACORD standard messages and providing various levels of application integration. Infrastructure with the capability to provide secure, resilient, cost effective messaging environments that simplify the exchange of electronic messages. 7 Custom presentation- or document control name
However there are still some obstacles we have to overcome if we are going to achieve this vision» There is a great deal of uncertainty in the market about how to implement the vision with many misconceptions.» Suppliers need to come together to make both technical and commercial decisions clearer and simpler.» The market needs cultural and behavioral change as well as systems and process change if it is to extract real benefit.» There is no central control to guide decision making around implementation.» There are many areas where the market needs to learn lessons from other industries.» There is huge potential for market to get it wrong and adopt short term, blind alleys.» There is still potential for market to do nothing. 8 Custom presentation- or document control name
We are proposing to establish a community to help overcome these obstacles. Called the WritePlace club this is:» Our response to requests from firms wanting to trial messaging, but:» Recognise that they need to collaborate with trading partners to do so; and» Need a low cost, low risk method in the first instance.» NOT about the development of the standard, that remains with ACORD. Entirely implementation focused.» Open to suppliers and other market bodies.» A collection of suppliers, underwriters and brokers interested in messaging, who:» Meet to discuss topics of interest» Attend demonstrations and workshops on particular solutions or proofs of concept» Agree to collaborate on pilots» Agree to share experiences» Facilitated by Atos Origin» Using WritePlace as the environment to hot house the development of electronic messaging. 9 Custom presentation- or document control name
Atos Origin is well positioned to be one of the industries message infrastructure providers because of its scale and existing capability Atos Origin runs significant mission critical financial services infrastructure:» The technology behind the leading financial exchanges in Europe, including LIFFE, LCH and Euronext. - The LIFFE exchange contains 1 trillion of liquidity at any one time - LCH handled 1.2 billion trades last year. - Atos Euronext manages the technology that powers NYSE Euronext, - World leader for listings, trading in cash equities, equity and interest rate derivatives, bonds and the distribution of market data. - Average daily trading value of its markets of approximately $102 billion/ 77 billion. - Recognised as providing the highest standards of market quality and integrity.» Atos Worldline operates high volume financial transaction solutions for major banks and dealing houses using it s large scale, secure platform 10 Custom presentation- or document control name
It is this industrial strength technology platform and in depth experience that we are building on for the London Market» Major financial institutions already trust Atos Origin with their secure transactions 11 Custom presentation- or document control name
This is important because London needs IT partners with scale and capability» Atos Origin has the scale and capability that the industry needs to meet its global messaging needs.» Atos runs it s messaging services as a utility. Its customers benefit from the aggregated volume running through it.» Atos invests 100 M annually in the development of its infrastructure. This is an investment from which London can directly benefit.» A large proportion of the necessary investment has already been made, Atos Origin therefore offers a low risk, cost effective way of delivering what the industry needs.» Because the infrastructure is in place and being configured for the market Atos Origin can bring benefits earlier.» Atos Origin has been there before and can therefore offer a wealth of experience in how to make this work.» Atos Origin has a London market team so it understands the London market and can put it s wealth of experience into a London market context. 12 Custom presentation- or document control name
For more information please contact: John Harvie t +44 (0) 7720 287216 John.2.harvie@atosorigin.com Atos Origin UK Limited www.atosorigin.com Atos, Atos and fish symbol, Atos Origin and fish symbol, Atos Consulting, and the fish itself are registered trademarks of Atos Origin SA. July 2007 2007 Atos Consulting