SWIFT is working with six of the world’s major prime brokers to develop and operate a centralised pre-settlement matching solution to reduce the cost and risk of processing equity and fixed income trades originated by hedge funds globally. By enabling trade matching on trade date or T+1, the solution will allow errors that could cause settlement fails to be identified up to two days earlier than they are today, drastically reducing risk for the brokers.

SWIFT was chosen to provide this solution following a competitive selection process.

The six brokers working together to pilot the solution during Q4 2008 include: Citi, Credit Suisse, Goldman Sachs, Lehman Brothers and Merrill Lynch. SWIFT and the prime brokers are currently working together to encourage the wider community of brokers processing trades for hedge funds worldwide to take advantage of the new solution.

The solution is based on SWIFT’s established Accord central matching service and will use industry standard messaging.

Today, discrepancies between trade details submitted to prime brokers by hedge funds on one hand, and their executing brokers on the other, are a source of considerable operational risk. SWIFT’s solution will improve the timeliness of pre-settlement matching of hedge fund trades between prime and executing brokers. Any errors likely to cause settlement fails will be identified sooner, reducing both risk and the cost of the manual processing required to fix breaks.

The brokers have agreed to oversee and provide transparency to the market on the evolution of the solution. They also value the fact that the SWIFT solution will offer choice in the marketplace for matching solutions, and will encourage further adoption of industry standards.

Gottfried Leibbrandt, Head of Markets at SWIFT, says: “We are delighted to have been chosen by this group of major prime brokers to provide a pre-settlement matching solution to the equity and fixed income markets, in addition to our existing FX matching capabilities.”