New SWIFT discussion paper assesses market readiness for 2011 deadline, and invites industry feedback

Eight years have passed since the famous Giovannini Barriers to efficiency in European cross-border clearing and settlement were first identified, and three have gone by since the solution for eliminating Barrier 1 of the 15 – national differences in information technology and interfaces across the EU – was published.

The so-called Giovannini Protocol was designed to standardise communication within the European clearing and settlement landscape, and was produced by SWIFT in conjunction with the Securities Market Practice Group (SMPG) – along with a clear recommendation for mandatory implementation by all cross-border clearing and settlement players (financial institutions and market infrastructures) in the EU by a deadline of March 2011.

As that deadline rapidly approaches, how far has the industry progressed in adopting the Giovannini Protocol and breaking down Barrier 1? This is the central question explored in a new discussion paper from SWIFT.

The paper, entitled “Countdown to 2011: Are you ready to break the Giovannini Barrier”, also asks for feedback from market participants on whether the 2011 deadline should remain, and on how the elimination of Barrier 1 should be handled in the context of other infrastructure change in Europe, such as the advent of Target2Securities.

The paper – which contains the results of detailed surveys into market readiness for and attitudes towards the Giovannini Protocol – concludes there is a mixed picture of compliance in the marketplace at the moment.

The institutional community still strongly believes the Giovannini Protocol is important to achieve improved clearing and settlement efficiency in Europe, and financial institutions are generally already compliant with and using the Protocol today.

With some notable exceptions, the infrastructural community on the other hand is relatively unprepared, and some central securities depositories (CSDs) are likely to fail to meet the 2011 deadline.

“The Giovannini Protocol remains as relevant today as it was when it was published,” says Andrew Douglas, head of industry initiatives, SWIFT. “It is clear from our research that, although some market infrastructures are lagging behind with adoption of the Giovannini Protocol, their customers, the financial institutions, do want to be able to use it, and believe it holds the key to improved clearing and settlement efficiency in Europe.

The question is, with everything else that is going on in the market today, what is the best way to achieve timely adoption of the Protocol by all relevant market participants, to ensure everyone gains the maximum benefits from this important enabler of European clearing and settlement efficiency?”

SWIFT invites feedback on the discussion paper, as well as on three questions specifically, formulated based on research and analysis carried out during the writing of the paper.

Please download the paper and email andrew.douglas@swift.com to share your views.