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Stay focused on standardization and STP, CorpActions 2008 delegates told

More than 100 people attended the third annual corporate actions conference in SWIFT’s New York office on 5 June

New York, June 19, 2008 - The industry has made significant progress towards achieving straight-through processing (STP) for corporate actions, but the challenge is highly complex and there is still much work to be done. This was the main conclusion of the CorpActions 2008 conference held on Thursday 5 June in SWIFT’s New York office.

More than 100 people attended this third annual corporate actions STP conference, hosted by Securities Operations Forum (SOF) in association with SWIFT. Amy G Harkins, senior vice president at Bank of New York Mellon and chairperson of the event for the third time, paid tribute to the industry’s efforts to improve efficiency of corporate actions processing. SWIFT’s corporate actions solution, based on ISO 15022 messages, has made a major contribution, she told delegates. However, there is no room for complacency, she warned.

A lack of consistency in application of ISO 15022 for corporate action announcements is still impeding STP, it emerged during a panel session on standards and quality – though Ted Rothschild, executive director, JPMorgan, highlighted some positive recent developments, notably SWIFT’s Simulation Testing and Qualification Service (STaQS) for Corporate Actions. Using STaQS, customers can self-test their corporate actions messages for adherence to market practice and the Event Interpretation Grid (EIG) developed by the Securities Market Practice Groups (SMPGs) to offer clarification on differences in events in different national markets. The more predictable corporate actions message formats are, the easier it is for market participants to automate around them.

However, Rothschild also pointed out that large financial institutions are usually active in 80-100 markets, while there are SMPGs in around 30 and not all of those have contributed to the EIG. Extending the work of the SMPGs into more markets has to be a key priority, he suggested.

Another outstanding challenge for corporate actions processing identified during the conference is the engagement of event issuers in efficiency efforts. Currently, significant work goes into collating and cleansing information about corporate actions announcements from disparate sources – a risky, time-consuming process. Getting issuers to adhere to industry standards “is the most important thing we can do to take risk out of the progress”, Rothschild said.

This theme was picked up during a panel session exploring a number of activities under way to bring issuers into the straight-through process. Some of these are focused on ISO messaging and some on formats such as XBRL, and, as the discussion revealed, there is concern in the industry that if these efforts are not coordinated, more problems could be created than solved. Co-ordination is happening – and Campbell Pryde, chief standards officer, XBRL US, reassured delegates that where ISO standards exist, XBRL will use them rather than trying to reinvent the wheel – but clearly this is an area in which continued co-ordination is a must, and the industry requires more information and reassurance going forward.

Other subjects discussed in depth during the conference included the challenges of corporate actions as they relate to over-the-counter (OTC) derivatives, taxation issues created by corporate actions, and the impact of class actions and whether there is an opportunity to implement standards and automated solutions to handle this growing activity.

In closing, Harkins told delegates that “more IT dollars need to be spent” on streamlining corporate actions processing, and she called on them to step up to the plate and get involved in the array of initiatives under way in this area. “You also need to partner,” she said, “with data vendors, with software providers – and definitely with your clients.” Suggesting that next year’s CorpActions programme should focus in more detail on tax, issuer and issuer/agent communications, derivatives processing and streamlining class actions, Harkins concluded with a call for firms to “stay focused on standardization – and keep the STP numbers going up.”

 

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