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Custody is no longer
confined to traditional settlement and safe keeping activity. The
custodianâ„¢s role is undergoing a metamorphosis, as clients demand more
and more sophisticated services. To strengthen their market presence
custodians are increasingly required to extend their services. Services
that were considered value-added are now regular features of their
custody service. Today clients demand standard custody reporting,
corporate actions, incoming processing, securities lending, tax
reclamation, contractual settlements, electronic communication links,
and automated sub-custodian networks as basic services.
Recent trends in market
practices require custodians to service clients across global markets.
Cross-border trading becomes the norm as investment spreads across the
globe and grows at exponential rates. This in turn has led to increase
in trade volumes. Custodians also need to adapt to the ever-changing
needs of local and foreign-investors and also meet increasing statutory
obligations. With so many demands being made, custodians are relying
heavily on technology in a bid to remain in the race. However,
technology solutions can help only when custodians know exactly what
they want from them. Client services like status information; trade
settlement information and client reporting are top priority. Solutions
that anticipate client needs and help provide services with minimal
delay and efforts are a boon.
Custodians looking for
technology solutions are not merely looking for automation of
processes. Maintaining a network of custodian- sub-custodian-
Investment manager- client, being first with information and services,
availing real time message processing and update of transactions, as
well as workflow management, are some of the capabilities that interest
What is really necessary therefore, is a comprehensive
industry-wide platform that enables speedy processing of data, both
securely and economically. Automation of as many processes as possible
is essential to increase efficiency and speed, and to avoid duplication
of work. But technology solutions do not stop at automation alone, they
must take into account other factors that enable custodians always to
protect the interests of their clients first. Solutions must support
workflow management by informing operations staff of the status of
orders, commitments and pending transactions at any point of time, so
that decisions are taken pro-actively with the client.
It is important therefore,
that any solution provider be able to improve the effectiveness of the
¢ Responsiveness to client queries
¢ Accuracy of information and report
¢ Pro-activity in client dealings
¢ Timeliness and frequency of information.
A wide range of custodial
services such as safe keeping, trade settlement, corporate action
administration, clearing transactions, registration of securities,
securities lending, charges etc., are highly automated in NCS.
Corporate actions, financial instruments (equities, debt instruments
and derivatives) fees and charges, and processing steps can be
configured to suit specific custodial needs. It caters to market
specific requirements such as maintaining letters of guarantee details
in lieu of share certificates (as in Manila) and legend status (as in
Hong Kong), and market specific registration processes of securities.
It also supports reconciliation of system records with vault holdings
(for scrip based securities), and reconciliation with statements sent
by the central depository (for scripless securities).
NCS is based on generically
re-engineered business processes to provide for increased automation.
It supports workflow management and improves client servicing response
time through online information on the status of various transactions
and trade reporting. The system has a generic corporate action
processing capability by defining a standard timetable applicable to
corporate actions, and by conceptualizing the result of any corporate
action based on transactions on the underlying security.

A comprehensive rejection
monitoring facility enables tracking of instances of rejection of
securities by a registrar( who rejects securities sent for
registration), a counterparty (who rejects securities delivered for
trade settlement), or a depository (which rejects securities sent for
de-materialization). The claim monitoring facility identifies
circumstances in which claims arise, generates the required claims, and
enables tracking of claims to closure. It also supports valuation of
client portfolios and has extensive client, management, and regulatory
reporting options.
NCS facilitates risk
control through prompts and alerts on pending corporate actions, open
claims, expiring securities, fall in value of collateral pledged by
borrowers, and deadlines. Audit is made possible by logging of changes
made with pre and post image reporting. Securities are provided for by
means of a well-defined security manager layer.
NCS is a flexible and
configurable application and can include customized message formats,
client defined code words and a variety of standing instructions. It
also supports multi-currencies and definition of differentiated
charges, and reporting packages. For areas such as fees and charges a
rule-based engine has been developed which provides the flexibility of
defining new methods of charges without having to overhaul the system.
¢ NCS has system interfaces with several external systems such
¢ SWIFT network for transmission of SWIFT messages.
¢ Proprietary Cash and General Ledger systems used by banks, such
as Hogan/MSA, Bank Master, Midas etc. (NCS supports online bookings
into the cash system for settlements, and checking of current cash
balances of clients prior to execution of buy/receive orders and
provides a sophisticated cash planning function for projecting client
cash balances.)
¢ Rate distributed systems to obtain foreign exchange rates.
¢ Price feed systems to obtain security rates, trade volume
information, and rating information.
¢ Other depository systems for trade settlement.
¢ Propriety reporting systems of banks.

The system has a
sophisticated message control function that allows the management of
inward messages, balancing workloads, monitoring and reporting of
problem messages, and handling outward messages. It has the ability to
distinguish problem messages from normal ones and route them
separately. This enables straight through processing of clean messages.
Technically, NCS has sophisticated communication capabilities that
conform to industry standards including SNA, APC, LU6.2, TCP/IP, and
the various SWIFT standards, enabling connectivity with various
communication networks and making NCS a completely open system.
A major strength of
NCS is its object oriented 3-tier client/server architecture. This
insulates the application from technical implementation and enables
enhancement to support future technologies in a transparent manner
without having a major impact on the application. The system provides a
consistent and user friendly GUI with interfaces to Email and MS word.

Business service modules



The 3-tier architecture requires
lower system and operational resources, provides security, enables
auditing of transactions, and makes it scalable to handle increased
business volumes. This also enables easy portability of the application
to other operating systems and databases. It provides for smooth
operation through facilities such as batch processing , back/up
restore, and recovery mechanism.

One of the key features of NCS is Ëœbusiness hubbingâ„¢. Here clients may
use one NCS site to transact business in affiliate offices of the
custodian where NCS is installed.
Business scenarios
change with emerging markets increasingly introducing advanced concepts
in trading, clearing and settlement. Rapid developments in financial
markets, evolution of new instruments and derivatives, and the need to
provide additional services to clients demand a system that facilitates
and supports change. The object-oriented architecture of NCS enables
customization of the system to meet future needs with minimum


External Messages

NCS Entities (Hubbing)
Key Product Features:
¢ Multi Currency
The system allows the
custodian to trade and report in the clientâ„¢s currency of choice. It
also supports multiple accounts, each having a different (or same)
currency. NCS has an interface to get the exchange rate between
currencies from rate providers and does all the conversions
¢ Flexible and Adaptive
NCS has customized
message formats, ability to include client defined code words, variety
of standing instructions, multi-currency support, differentiated charge
and reporting package definitions. It has communication capabilities
that comply with industry standards and has the potential to connect to
a variety of communication networks and hence is interoperable.
¢ Straight through Processing
NCS provides for a
sophisticated message control function that allows management of inward
message traffic, balancing workloads, monitoring and reporting of
problem messages and handling of outwards messages. This is one of the
most important features of NCS as it permits the system to handle clean
messages without user interference.
¢ Efficient and Reliable
Technology experts and
vendors such as IBM, Sybase, have reviewed the implementation of the
transaction architecture at various stages; the system architecture is
superior and technically reliable.
¢ Secure
NCS provides for improved
Risk Control through prompts and alerts on pending corporate actions
open claims, expiring securities and deadlines.
NCS is secure through a
well-defined security manager layer. Information is controlled through
role-based access. Each user can be attached to one or more roles. The
custodians can customize/create new roles as per requirement. NCS has
comprehensive audibility features. All modifications are auditable by
logging of changes made with pre-/ post image reporting.
NCS Architecture:
The NCS application
follows a layered design approach. By grouping logically related and
cohesive functionality together in one layer, the application offers
benefits like modular design, efficient resource utilization,
configurable parameters, simplified development, better performance
and ease of maintenance .
The NCS application is
based around a client-server model/paradigm. The client component
interacts with the end-users and provides the User Interface functions.
The Server component provides one or more services to the client and
other external requests. The Client and the server Components
communicate between each other over a Local Area Network through
requests and responses. The Client/Server model maximizes the
application throughput and reduces the Server overhead per use
interaction by distributing the user interface processing on powerful
clients, business logic processing on the Server etc.
The system environment of
NCS comprises of:
¢ MS-Windows based Client workstations comprising of a
Presentation layer developed using Power Builder and User Interface
(UI) manager developed using MS-windows SDK. (a development kit by
Microsoft using the C programming language)
¢ Application Servers on RISC/6000 with CICS/6000 as the On-line
Transaction Processor OLTP) and Sybase as the Relational Database
Management System (RDBMS). It is not mandatory that Sybase be used at
the back-end; the layered approach makes porting to other Databases,
like Oracle, feasible.
¢ A Network interface using the Novell NetWare to provide the
necessary interface between the Client and the Sever using the TCP/IP
System Components:
Broadly, the
Application Architecture has been classified into the following
components to achieve the objectives:
¢ Application Presentation Layer
¢ User Interface (UI) Manager
¢ Universal Transaction Processor (UTP)
¢ Application Security Manager
¢ System Manger
¢ Data Manager
¢ External Communication Manager
¢ Report Manager
¢ Error/exception Handler.
The various layers
identified above can be further grouped into the Client layer and the
Server layer based on their expected functions. The Client layer,
therefore, consists of:
¢ Application Presentation Layer for user interface developed
using Power Builder
¢ User Interface Manager(UI Manager) layer developed using MS-
Windows SDK
¢ Universal Transaction Process (UTP for the client) layer
developed using CICS Clients on Windows
¢ Network interface layer to interact with Server.
The Server layer consists of
¢ Network interface layer to interact with the Client
¢ Universal Transaction Processor (UTP for Server) layer
developed using CICS/6000
¢ Application Security Manager for security validation
¢ Data manager to interact with the Sybase Database
¢ External Communications Manager to interact with the external
¢ Report Manager for generation of ad-hoc and batch reports
¢ Systems Manager
Application Presentation Layer
The application presentation layer
of the Client will provide the front end to the users for interaction
with the NCS application. The Presentation layer interacts with the
end-user to get inputs and present the results. It also interacts with
the User Interface Manager and the UTP Client to pass the user inputs
and get the responses. The layer shall allow user to interact with the
system in a non-sequential manner. Multiple windows can be on the
screen at the system, allowing different functions of the application
to be accessed. The layer shall also supports interaction, exchange of
data between NCS and other MS-Windows application. The layer will also
provide context sensitive help to the user.
User Interface Manager
The User interface
(UI) Manager is responsible for managing all the necessary
functionality of NCS on the client PCS. These include, Startup,
Shutdown of client, local processing and error handling at the Client.
On the other side,
it communicates with the Client UTP to communicate to the Server and
get responses from the Server.
The functions
provided by the UI Manager include:
¢ Provide facility for establishing connection with the Server
application through the Universal Transaction Processor for Login,
Logout, Screen locking, Screen unlocking.
¢ Get the user-roles and other static data from the Server
application and maintain the same in memory.
¢ Invoke the Application Presentation layer services to present
the results to the user.
¢ Provide facility for receiving and processing any broadcast
(Unsolicited) messages from the Server for the Client.
¢ In case of any error detection at the Client level, map the
error code to the corresponding error messages and provide the same to
the Presentation layer for message display.
Universal Transaction Processor
The Universal Transaction
Processor provides the mechanism for implementation of the
Client/Server model. The UTP layer implements the communication and
transactions management between the Client and the Server. It comprises
of two components: UTP Client and the UTP Server. The UTP provides a
set of Application Programming interfaces (APIs) on both the Client and
the Server workstations enabling the Client and the Server to inter-
At an overall level, the UTP will provide a framework
for the execution of the background processes (CICS transactions) in
the system.
The UTP shields other NCS components from communication
and transaction management implementation. This layer provides a set of
services, which encapsulate the underlying CICS/6000 and other
associated services in a configuration required by the application.
Client UTP
The UTP on the Client workstation
provides a set of APIs for the UI Manager to initiate communication
with the Server. The functions provided by the UTP Client include:
¢ Initiate a synchronous transaction on the Server
¢ Get response for the synchronous transaction from the Server
¢ Initiate an asynchronous transaction on the Server
¢ Get response for the asynchronous transaction from the Server
¢ Check for any Notification/broadcast (Unsolicited) messages
from the Server for the Client
¢ Send request to the UTP Server for the unsolicited messages
¢ Receive the message from the Server
¢ Pass the responses to the Presentation layer for subsequent
¢ Authenticate the communicating party
Server UTP
The Server UTP provides a set of APIs for communication
between various Application Server components and manages communication
with the Client. The functions provided by Server UTP include:
¢ Receive the request messages from the Clients
¢ Interface with the Application Security manager to validate the
authenticity of the incoming requests from the Clients
¢ Initiate/Invoke a service identified by the Client request
¢ Communicate with the Data Manager for any database related
¢ Send responses to the Clients for requests made either in the
synchronous or asynchronous mode
¢ Generate broadcast message(s) for the Client(s), automatically
when necessary or upon request
¢ Send the broadcast (Unsolicited) messages to the Client
¢ Provide a mechanism for sending of notification messages
generated by the application modules
Application Security Manager
The application security manager provides application
level security to the system data being accessed by various categories
of the users. In addition, it will provide facilities for User password
maintenance, service authentication etc. The functions provided by the
application security manager are as follows
¢ Provide facility for password maintenance by the user as well
as the System Administrator
¢ Get information regarding the roles and functions applicable
within the role for the Client to the Client workstation at the time of
the Client login90
¢ Authenticate the validity of the user for the services
requested from the Client workstations
¢ Authenticate the validity of the messages received from the
external systems through the External Communications Manager, where
Systems Manager
The Systems Manager provides a
mechanism for performing the normal system functions such as scheduling
of batch processing, static data mechanism etc. The Systems Manager
will provide the following functions:
¢ Facility for the reception of inputs from the customers and
other external systems over batch media such as tapes etc.
¢ Facility for processing the inputs received over the batch
¢ Provide facility for the system administrator for
creation/maintenance of users for the Network custody System
¢ Allow for the grouping of the Network Custody System functions
into application roles
¢ Assign one or more roles and the associated functions to the
¢ Facility to provide interface to the system administrator to
maintain the static data
¢ Provide a mechanism for the execution of batch jobs with multi
-threading, restart facility, file handling facility etc.
¢ Provide facility for system startup, shutdown
Data Manager
The Data Manager will provide all the necessary database access
and update services to the application components of NCS. All
functions, which result in the update of the NCS database, will be
routed from the application components through the Application Security
Manager. The functions provided by the Data Manager are as follows:
¢ Provide DM functions for accessing/updating the NCS database
¢ Provide facility for auditing facilities for database updates
¢ Manage exceptions in database operations
External Communications Manager

The External Communication Manager provides an interfacing mechanism
with various external systems like SWIFT, VISTA, cash systems like
HOGAN, MSA, BANKMASTER etc. The type, mode, format of external system
interfaces should be transparent to the application modules. The
external communications manager also takes care of the hubbing
requirements. The functions provided by the External Communications
Manager are as follows:
¢ Establish Connection with the remote external system
¢ Terminate the Connection with the external system
¢ Manage time scheduled interfacing
¢ Define the type, mode and format of each external connection
¢ Associate each external connection with an application process
¢ Provide distributed transaction initiation/processing
For incoming messages
¢ Receive messages from the external system
¢ Validate the message for the authenticity of the Sender by
interfacing with the Systems Security Manager, where necessary
¢ Translate the message from the external format to the NCS
internal format
¢ Maintain a log of all incoming messages from the external
¢ If required, send responses to the external system
¢ Invoke the appropriate Application server processes for the
processing of the message
For outgoing messages
¢ Interface with the appropriate application process to get the
message to be sent to the external format
¢ Send the message to the external system
¢ Maintain a log of all outgoing messages from NCS
¢ Receive responses from external system, if required
In the case of hubbing, the external communications manager should
maintain the details of other NCS sites with which it can communicate.
For each site, it maintains whether the mode of communication is
through distributed processing or through the fallback media (SWIFT).
Each site (standalone or hubbed) will operate in a CICS region and
Sybase database defined for it. Depending on whether a target site is
hubbed or not, the external communications manager should invoke the
appropriate process associated with the external system for exchanging

Report Manager
The Report Manager provides the
facility for generation of reports and dispatching of the same to the
end-users. The Report Manager provides the following functions:
¢ Schedule batch reports requested by the end-users
¢ Process on-demand report requests
¢ Generate reports
¢ Interface with the report archival system for archival of the
¢ Dispatch the reports to the necessary destination
¢ Manage distribution lists.
Error/ Exception Handler
The error/exception handler provides facilities for handling
errors/exceptions arising in the Network Custody System. The exception
handler should provide the following functions:
¢ Provide exception handling for the following types of
¢ CICS/6000 related exceptions
¢ Database/application related exceptions
¢ Network/communication exceptions
¢ Security related exceptions
¢ Exceptions in the Client workstation
¢ Rollback the database related updates done in the event of the
error/exception detected since the last checkpoint taken during the
¢ Provide for tolerating the ˜ record not found™, ˜duplicate
recordâ„¢ conditions etc. depending upon the application requirements
¢ Generate a report on error/exception detection providing
detailed information regarding the error/exception and print the same
¢ Maintain a centralized error log for all errors/exceptions
detected at the Client as well as the Server
The error/exception handler in the Network Custody System will be
implemented as a set of handlers for each type of errors/ exceptions
mentioned above.
Hardware & Software Requirements
The client workstation will be a PC-
486/Pentium and the server will be a RISC-6000/ IBM Mainframe 9672-R35
Operating System
Operating System Version
OS 390 V2R8
Client machine: Windows NT / Windows 2000
AIX 4.3.3
System software
System Software Version
UDB 7.2
IBM CICS Transaction server
CICS Client on NT / WIN 2k Pentium work station preferably with 256 MB
RAM and 10GB hard disk V 5.0
Client on NT/Win2K Pentium work station preferably with 128 MB RAM and
2GB hard disk V 4.0
Programming languages
Programming language Version
C++ 3.6.2
Special software
Special software Version
Power Builder 8.0
Sybase Adaptive Server 7.0
Deployment will be on mainframe with database as DB2.
¢ SWIFT stands for the Society for Worldwide Interbank Financial
¢ Owned by hundreds of banks worldwide
¢ Legacy and still predominant service is the Financial
Information Network (FIN), a store-and-forward messaging service
supporting over 240 message standards for payments, securities, trade
finance, etc.
¢ Traditional customers include custodian banks, depositories,
and settlement houses.
¢ For the securities industry, most message usage is post-trade,
pre-settlement, post-settlement and custody services.
¢ Provides additional messaging services.
¢ Provides room for growth using updated technology
¢ The medium for an XML-based standard
SWIFTNet Utilizes IP to access Services

¢ InterAct: Real-time exchange and store-and-forward exchange of
messages between parties
¢ FileAct: Large volumes of data for automated file exchange,
both real-time and store-and-forward (e.g. credit transfers such as
pension or salary payments, securities clearing, settlement
¢ Browse: Secure (authentication, encryption), browser-based
access to messaging features of other services
NCS-A Solution For The Future
The product, Network Custody System (NCS), started in 1995 was meant to
support the custody related business requirements in both scrip less
and scrip based environment.
It provides a high degree of automation in a range of custodial
activities such as trade settlement, corporate action administration,
registration of securities, billing and the like. NCS is object-
oriented network; open systems based and are under client-server
architecture. The product functions are governed by industry standards
such as SWIFT messages/Action Source/Bloomberg/VISTA for information
exchange on one-hand and complex algorithms for valuation, ever-growing
list of corporate actions and newer instruments on the other. Also, the
business and industry need to have a solution that will support the
business volumes, which fluctuate based on market influence, with
minimum operational resources. Further, the operations people need to
know the status of orders, commitments and the pending work load at any
given situation so that issues such as buyings, breaking of chains etc.
are avoided and decisions are taken pro-actively with the client.
NCS integrates a number of business requirements across markets and is
designed with the following objectives:
¢ Maintaining client focus
¢ Improving business efficiency through work flow management
¢ Managing risks through prompts and alerts
¢ Providing a flexible architecture for future requirements.
¢ http//
¢ http//
¢ CSI Journals
¢ Computer Networks- Andrew S.Tanenbaum
1. Introduction-A unique custody solution for the new
2. NCS- The Features
3. An overview of the entire system
4. 3- Tier Architecture of NCS
5. Key Product Features
6. NCS Architecture
7. System Components
8. Hardware & Software Requirements
¢ Introduction
¢ SWIFT Messages
¢ SWIFT Usage
¢ SWIFTNet Utilizes IP to access services
10. Conclusion- NCS- A Solution For The Future
11. Bibliography
Post: #2
dude the ppt....if available
Post: #3


Custody is no longer confined to traditional settlement and safe keeping activity. To strengthen their market presence custodians are increasingly required to extend their services. Services that were considered value-added are now regular features of their custody service.

A wide range of custodial services such as safe keeping, trade settlement, corporate action administration, clearing transactions, registration of securities, securities lending etc., are highly automated in NCS.

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