Many of us make a living using technology to implement and support business logic. The applications we build and platforms on which we implement these business applications are many and varied. While these are pretty obvious statements, this article will explore the techniques used to support inter and intra-firm business communications.

Commercial business cannot exist in isolation - it trades. In the case of capital markets the traded instruments vary widely. They may be quite tangible things such as trade services for goods, payments, energy, commodities, or the much less tangible synthetic instruments such as options and derivatives.

The transaction flows that support the trading, settlement and payment flow of these transactions is the domain of industry messaging standards bodies. These standards bodies exist to optimize success rates. They provide specifications for business interactions, the supporting messaging data models and the rules to ensure these transactions can be automatically transacted with minimal exceptions or settlement failures. This we know as Straight Through Processing (STP).

The financial services these standards target are specific transaction types, and in some cases specific phases of the transaction lifecycles. For example:

• The Financial Information eXchange (FIX) protocol is predominantly a front office standard for pre-trade and trade. FIX is a tag/value pair protocol that is designed to be extensible by adding custom extension tags, and includes a session level and application level protocol definition.
• SWIFTNet FIN MTs cover multiple instruments in middle and back office transaction flows, historically for payments, securities settlement and reconciliation, and custodial communications. SWIFTNet FIN message types are complex tag/value formats, and are commonly overloaded by using qualifiers and code words on the same message type models for unique business contexts.
• Financial products Mark-up Language (FpML(r)) is for OTC derivatives trading and settlement. FpML is a more recent XML schema-based standard. It is published by the fpml.org under the governance of the International Swaps and Derivatives Association (ISDA). It is a technically advanced message protocol which uses sophisticated XML schema constructs and added business validation rules that overlay the FpML data models. These rules are not directly implementable in XML schema, therefore are usually implemented in some sort of overlay language such as XPath or Schematron.

So how, with these dramatically different "standards," can protocols be standardized?

It's not easy. As noted, we have standards, and we have context-based specializations of these standards. And of course the base standards themselves continue to evolve based on the associated standards bodies implementing updates to provide support for new instruments, business requirements and regulatory changes.

This is where we introduce the ISO 20022/UNIversal Financial Industry message scheme (UNIFI). The UNIFI standard has a simple objective: to provide a standardized and agreed framework for defining standards using a common XML syntax. It is a standard for standards.

XML technology and best practices have come a long way since the early days of XML when ISO 20022 began in the 1990s as

ISO 15022 2nd Edition (also known as SWIFTML). The revised

ISO 20022 incorporates lessons from the first implementations of ISO 20022 funds messages, along with FpML, FIX, and others; and provides examples of successful best practice for ISO 20022 to converge with ISO 15000 ebXML.

ISO 20022/UNIFI and XML help, and are the strategic direction upon which this diversity is converging. This creates an interesting dilemma: the need to support the old, the new, the in-between, or convergence, coexistence and migration.

The optimal approach to the inherent diversity of these technical standards implementations is to use integration technology that helps developers easily bind the diverse range of tag/value and XML data model syntax formats and implement the validation rules that overlay these formats using open technology implementations.

Consumers of these standards should be able to source pre-built standards libraries with associated service level guarantees that they will be maintained in sync with whatever the standards bodies release. And most importantly, the technology should facilitate the migration from the old to the new, while supporting the co-existence where both old and new will be in production.

Given this offering, the lives of implementers and maintainers of financial services messaging standards can be made much easier now and in the future.

Wayne Meikle is the financial services sales and marketing director for IONA Technologies, +44 20 7117 0024; email: wayne.meikle@iona.com; web: www.iona.com.