RE: Auto-reconciliation - the killer app - go for it!

[Andrew Chilcott <andrew.chilcott@stpsolutions.com>]

Mike

The situation that Todd Boyle describes is already in use in the UK
securities market and I will try to explain the business model in generic
terms as I believe that it could well be included under the General Business
Requirements as a model for secure transactions between members of an
electronic community with a central record archive and a trusted third-party
to provide assurance for non-repudiation of contracts.

A central industry hub (CREST) provides a service whereby industry
participants (who can be securely identified by the hub) are able to submit
a message detailing a transaction they claim to have undertaken with another
participant. The messages submitted by each party to the transaction are
matched on the basis of mandatory fields. The hub provides status update
messages to the transaction participants. As soon as matching occurs the
trade is available for settlement on the due date (one of the mandatory
fields). The hub has real-time access to a record of the resources being
exchanged in the transaction (cash and securities). When the due date is
reached the hub checks to see that each party has sufficient resources to
complete the transaction and, if so, issues messages to the custodians of
the resources (cash and securities) instructing settlement to take place.
The central hub holds messages, copies of which can be downloaded by the
participants and imported into accounting systems, of all aspects of the
transaction. Each participant is therefore using an identical record to
update their internal systems and no reconciliation is required. The central
message is archived after 60 days but can be recovered by the hub (as a
trusted third-party) to prove that a contract existed between the parties
and the terms of the contract.

In B2B transactions I think that the third party assurance of
non-repudiation is critical to the global roll-out of eCommerce.

andrew.chilcott@stpsolutions.com
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