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A-Team Insight Blogs

Asia is Much Further Ahead in Terms of Corporate Actions Standardisation Than the Middle East and Africa, Says StanChart’s Davies

The Asia Pacific region has come a long way over the last few years in terms of corporate actions standardisation and best practice adoption, according to Mark Davies, head of investors and intermediaries at Standard Chartered Bank in Europe. Although it is often lumped in with markets such as the Middle East and Africa, the region is much further ahead in terms of automation, Davies explained to delegates at this month’s CorpActions 2011 conference in London.

“Some markets have, in fact, achieved a high degree of automation in some areas of the corporate actions lifecycle,” said Davies. “However, certain markets continue to suffer from legislative loopholes and foreign language issues.”

He pointed to the Indonesian market as one such example, where issuers are permitted to announce corporate actions in local newspapers and they select this option if they want to keep the event off the investor radar. “Technology may have improved a lot over the last few years, but it is issues such as these at the source of the announcement that make data collection a much harder task,” he explained.

Davies noted that as a sub-custodian in these markets and others, the biggest risks and challenges are involved in creating a gold copy from sometimes unreliable and unformatted data. “As a multi-market provider we want to be able to provide a uniform experience for our clients via the consistency of data and therefore we aim to use a single engine for this data,” he said. The push towards standard announcement formats such as XBRL, which is being championed by Swift and the Depository Trust and Clearing Corporation (DTCC) at the moment, is to be welcomed in Davies’ eyes.

Speaking about Africa and the Middle East, he noted that these markets are at the start of the corporate actions standardisation journey, given that they are faced with “basic problems” related to taxonomy. The definition of “pay date” versus “payment date” is one such example where individual firms differ in their interpretation across these markets, he said.

John Kirkpatrick, managing director for Global Asset Servicing at Citi Global Transaction Services, noted that there has been a lot of effort in Europe but only three markets in Asia are fully automated in their corporate actions messaging. Asia may have come a long way and it may be ahead of some of the other laggards, but it is far from harmonised.

Fellow panellist Colin Webb, senior manager for corporate actions at Fidelity Investments International, agreed that there is a lot of work to be done on a global level to agree consistent data standards across markets. “STP for everything is not a realistic goal, we should focus on the areas where we can standardise and automate,” he added. “Standards work may have progressed on a national, or even regional level but much more work needs to be done in terms of market harmonisation.”

Kirkpatrick indicated that the biggest pain point is often felt at the sub-custodian level, where there is a “long way to go” in terms of receiving consistent data formats. He suggested that regulatory intervention to force through change might be the best option in terms of standardising announcement data.

Webb noted that even when standard formats are available, problems can occur due to misinterpretation and misuse of data fields, thus some level of education is needed before standardisation can be achieved. Kirkpatrick added that voluntary instructions are a particularly challenging area with regards to this and this increases risk in the process.

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