Pioneering XML for Cash Management Centralisation & Integration at NYSE Euronext

by Philippe Matsumoto, Senior Vice President and Group Treasurer and Fabien Varoquier, Head of European Treasury Operations, NYSE Euronext

With exchanges in both the United States and Europe, NYSE Euronext (NYX) has two treasury centres based in New York and Paris, which together manage the treasury operations and financial risks of the group. Euronext Paris is registered as a specialised financial institution and provides in-house banking services to other NYX entities. However, we needed to further improve the centralisation of cash across our European entities, that are located in UK, France, Netherlands, Belgium and Portugal. Due to fragmented banking relationships, we experienced both difficulties and unnecessary costs in our operations, so we sought to rationalise our different banking relationships and appoint one single European cash management provider. In conjunction with this project, a new shared service centre (SSC) was implemented in Amsterdam, Netherlands, to centrally manage account payables, account receivables and general ledgers, therefore reducing the financial processing at a local level.

Identifying a solution

We launched a request for proposal (RFP) in the summer of 2009 to potential European banking partners. We had identified a range of criteria:

Firstly, the bank needed to provide coverage in the relevant countries;

Secondly, the bank needed to propose a solution allowing us to minimise the number of interfaces and protocols we would have to maintain going forward;

Thirdly, the bank needed to provide competitive pricing.

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On top of these initial criteria, we needed some comfort in the bank’s ability to deliver on our project and engage into a long-term relationship on this topic.

In addition to selecting a European bank, we decided to use SWIFTNet. As an exchange, Euronext Paris was already using SWIFTNet for some of its businesses. We realised that by extending this solution further, we could rationalise the bank connectivity as well as achieving greater bank-independence. Furthermore, by using XML ISO 20022, we could communicate with our bank in all countries using a single format.

Having identified two shortlisted banks in October 2009, we made the decision to appoint Societe Generale as our European bank. The bank provided the geographic coverage we required, competitive pricing and, just as importantly, price transparency. For example, it was very important to us that as many payments as possible were priced as domestic payments, which would make a major difference to our bank charges. In addition, Societe Generale, the second largest lender to the NYSE Euronext group, had demonstrated its commitment to a long-term relationship with NYX.

From concept to reality

Having appointed Societe Generale, the bank provided us with the specifications of the XML ISO 20022 format for set up and testing. Societe Generale has consistently supported us throughout the rigorous testing process. As the format was new to us and to our treasury system supplier, we conducted extensive tests. A major challenge was that many IBAN or BIC codes were missing in our supplier database, so we needed to undertake a project in parallel to address this and collect the missing codes. Also, certain special characters that we used in our systems were not supported using XML, so we had to clean up our database in order to use the ISO 20022 format. Having completed this, we tested every major scenario for each country, which meant exchanging up to 25 sets of test data every day with Societe Generale. There were inevitably minor tweaks that needed to be made, but there were no major issues and we received a great deal of support from the bank.

Cash pooling

In addition to the technical and operational integration, the cash centralisation using ‘zero balance account’ cash pooling has been a key element of the project. While we pooled cash sporadically in the past, this was a manual process through the in-house bank, and we wanted to become more systematic. We therefore set up both euro-denominated and sterling-denominated cross-border cash pools that enabled us to centralise cash daily at the central treasury, whilst ensuring that operating companies had the cash they required for their day to day operating needs.

Project progress

The project was rolled out gradually, as we opened Societe Generale accounts in each country and linked them to the cash pool. Paris has been implemented first, with payables and receivables processes transferred to the SSC, and accounts linked to the header account in the cash pool. The SWIFT connectivity was completed mid 2010, with ISO 20022 formats in use for payments and MT940 messages for bank statements.

All locations have now migrated with the exception of Portugal, which we will connect into the European banking structure soon. This will involve working with a Societe Generale partner bank. In addition, we will be assessing the potential benefits of SEPA Direct Debits and how we can use our existing infrastructure to diversify the payment options we offer to our clients.[[[PAGE]]]

Experiences and outcomes

The project has been a very positive experience. We have established an excellent relationship with our key relationship manager at the bank, who then co-ordinates Societe Generale resourcing across each of our countries of operation. This cohesive approach, as well as the technical and business expertise of the bank, has been essential to the successful project delivery.

We have successfully achieved our objectives. By implementing SWIFTNet and ISO 20022 formats, we have managed to avoid maintaining multiple costly and resource intensive formats, interfaces, protocols and networks. We have standardised our payment processing and achieved a consistent level of reliability. By centralising our cash management activities with a single strategic banking partner, we have a better visibility and control over our cash and are able to better optimise our cash and debt positions. Bank charges are lower, as a result of economies of scale and a reduction in cross-border costs. Subsidiaries do not perform treasury tasks any more, thus increasing efficiency and control thoughout the group and facilitating our Sarbanes-Oxley compliance.

With the implementation of the shared service centre and the centralised payment factory, we have implemented world-class finance processes and are ready for the next challenges.