Printed from: http://www.seccom.govt.nz/publications/documents/austraclear/05.shtml?print=true on Wed 25 November 2009
ESAS Austraclear NZ
Electronic Registry Interface
2.0
Overview: Proposed Electronic Transfer System
Background
All securities settled in Austraclear must be transferred (lodged) into NZCSD before they can be settled in the Austraclear NZ system, requiring a transfer of ownership of the security from the beneficial owner to NZCSD on the respective registry and the entry of the relevant information in Austraclear. Alternatively a security must be transferred (uplifted) out of NZCSD before the member can settle the security outside of Austraclear, requiring an update to the relevant Austraclear information and a transfer of ownership of the security from NZCSD to the beneficial owner on the respective registry.
On average, there are 400 security transfers in to and out of NZCSD each day, each requiring an associated "lodge" or "uplift" transactions to be processed within Austraclear. These 400 transactions must also be completed either through the NZX FASTER system or directly with the Registrar of the relevant security (non-FASTER), to complete the ownership change of the security (in to or out of NZCSD's name).
These security transfer transactions are completed via:
- Manual data entry,
- Completion of paper transfer forms, and
- Communication via fax, email or telephone.
Because this process is largely manual and paper based, it is relatively inefficient, prone to error, extremely time consuming, and is frustrating for Members, the registries, the system operator and the financial markets. Currently the time to complete a lodge or uplift transaction in Austraclear and for completion of the associated security transfer on the relevant registry is one hour, but can often take longer depending on processing at the registry. This delay causes issues for members as the security is immobilised in Austraclear until the security transfer is completed. In addition, the delay also limits the amount of time available for members to complete settlements linked to the relevant security.
To address the inefficiencies, issues and costs associated with the current process used for transferring securities directly between NZCSD and the various registries i.e. non-FASTER transferable, it is proposed to implement an electronic security transfer system between Austraclear and the relevant registries in New Zealand. This electronic transfer system will replace the current manual processes with a completely electronic process for non-FASTER transferable securities.
The new electronic process will capture all the relevant transfer information entered by the Member in Austraclear for the relevant lodge or uplift, format that information into a SWIFT message and then send that message to the relevant registry in New Zealand over the existing ESAS-Austraclear NZ network (requiring the registrar to be a member of the Austraclear NZ system). While the new electronic transfer system will effectively just replace the current manual paper based process (although it will be possible to revert to the current process at any time), it does offer many advantages and improvements:
- The electronic transfer function will only be capable of being invoked from within the Austraclear system. Since system access requires a valid company and user logon, and user access to the actual transfer functionality (granted by the Members system administrator), the new system will provide greater control over the transfer itself as well as providing an extensive audit trail.
- The message transfer will take place over the secure ESAS-Austraclear NZ network, with the actual messages being sent between systems using Secure File Transfer Protocol (which utilise SSH technology). This transfer mechanism will therefore be much more secure and robust than the current manual process.
- The electronic transfer message will only be sent from the Austraclear system to the respective registry if all the required transfer information is entered in Austraclear by the authorised user. The information that a Member will be required to enter will be at least equivalent to that currently entered on the manual transfer form. Further, the system will undertake multiple validation checks on the data as it is entered and prior to the security transfer message being sent. The electronic transfer system will therefore enhance the accuracy and integrity of the data relating to the security transfer request.
- The new system will reduce the turnaround time for both lodges and uplifts from the current 1 hour (plus) to less than 5 minutes, drastically reducing the time that the security is immobilized within the Austraclear system.
- The new system will process each transfer (lodge or uplift) separately, with each request being individually formatted into a SWIFT message for transfer and processing. Each message transferred between the Austraclear system and each registry system will be uniquely identified, with all systems being able to identify the status of all messages sent and received at any point in time.
- Austraclear members will have greater visibility as to the status of their lodge/uplift transactions, with the status being updated in Austraclear in real time.
Process Flow: Manual vs. Electronic
The diagram below illustrates the current process whereby a security is lodged into the name of NZCSD on the Registry with no FASTER interaction.
Those tasks detailed in blue are the aspects of this process that we propose to automate.
Those tasks detailed in
red (and underlined) are the aspects of this process that we propose to remove entirely.
2.2.2 Uplift of Securities from NZCSD on the Register:
The diagram below illustrates the current process whereby a security is uplifted out of the name of NZCSD on the Registry with no FASTER interaction.
Those tasks detailed in blue are the aspects of this process that we propose to automate.
Those tasks detailed in
red (and underlined) are the aspects of this process that we propose to remove entirely.
Transaction Transmission
The existing Austraclear transaction input screen will be redesigned to accommodate
information previously contained within the paper transfer form.
The Austraclear member will input all mandatory information and submit the
transaction.
Upon submission, the data for each lodge/uplift transaction will be formatted into a
separate SWIFT compliant message file and transmitted electronically to the Registry.
This transmission will be completed using Secure File Transfer Protocol (SFTP) which
uses the security provided by SSH (Secure Shell).
When the file is pushed to the Registry, a response will be received immediately to
recognise failure or acknowledge successful receipt of the transaction.
Assuming the file transfer has been successful, the transaction will be uploaded into
the Registry system and a response, in the form of a SWIFT compliant message file,
will be returned to Austraclear. This response will be transmitted using the same
protocol and algorithm and will confirm either a successful transfer or detail the reason
for transfer failure.
Upon receipt of the Registry response, Austraclear will upload the file and the
transaction process will be auto-completed.
Transaction Identification
Each eligible lodge/uplift transaction , when submitted within Austraclear will be given
a Unique Transaction Identifier (UTI).
This UTI will be used throughout the transmission process (i.e. within the files sent by
both Austraclear and the Registry system) and will serve the following purposes:
- Provide a definitive identification/reference for the electronic transmission process
- Provide a definitive reference in the event of transaction or transmission failure
- Provide a definitive identifier within the transaction upload process
Transactions will be retained and stored on both the Austraclear and the Registry systems so that they meet or exceed the relevant legal requirements.
Transaction Failure
Full alert notifications and access to view the transactions 'below the surface' via existing functionality will be utilised to inform RBNZ and/or Registry staff of potential issues and assist in the issue diagnosis.
There are several potential points of failure in the file transmission process:
- File fails to leave RBNZ
- File leaves RBNZ but does not arrive at the Registry
- Files leaves RBNZ, arrives at the Registry but is not processed.
- File leaves Registry but does not arrive at RBNZ*
- Files leaves Registry, arrives at RBNZ but is not processed
- File is sent twice by either RBNZ or Registry*
These points of failure will be rectified by one of the following:
- Mechanism to auto-resend a failed file transmission
- Ability to manually force a transaction through the secure channel .. Ability to manually confirm the successful transfer as per Step 6 in the above diagrams
- Application support calls to the Austraclear system vendors to view/repair transmission protocol errors
- Ability to revert to the previous manual processes in the event of a complete loss of the file transmission protocol.
It will be the responsibility of Austraclear staff to ensure that all transactions are complete at the end of each day and this will be built into current operating procedures.
* In these scenarios the legal ownership has changed as per the transfer/request form.