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Citi to Act as Proving Ground for XBRL Tagging in Corporate Actions Space

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Following on from the release of its case study earlier this year, XBRL US has indicated that it is working with global custodian Citi on a pilot programme to prove the benefits of XBRL tagging in the corporate actions space. The pilot is focusing initially on tests on dividend announcements issued by American depository receipts (ADRs) due to the extent of the manual processing involved currently in the space and the relatively limited number of parties involved in the process, according to David Hands, director of product development at the Depository Trust and Clearing Corporation (DTCC), which has been working with XBRL US and Swift on the initiative.

The pilot programme will use the XBRL ISO 20022 taxonomy to create XBRL formatted documents that will be used directly by downstream users. The endeavour should go some way to proving the figures published in the group’s case study for XBRL adoption, which indicated an estimated saving for the industry of US$400 million a year and potential direct savings to investors and their investment managers of US$172 million annually.

“Citi’s collaboration in this pilot will help to demonstrate how a large amount of information can be more easily, accurately and efficiently consumed, saving money and time and ultimately getting critical information to investors,” says Hands.

ADRs are US securities based on foreign shares that are received and processed by depositary banks such as Citi. Announcements about ADRs are transmitted from Citi to stock exchanges, investors, depositories such as the DTCC, and other intermediaries. According to Karla McKenna, director of Citi Securities and Fund Services in New York and chair of ISO’s technical committee for the financial services industry, ISO TC68, the selection of ADRs for the pilot was based on limited number of depositary banks involved in communicating dividend information and the extent of the manual intervention required in this process.

This is all part of the project, which officially kicked off in May last year, to map the XBRL taxonomy to the ISO 20022 messaging standard in order to ensure that they are compatible in the future. The business case and pilot programme are therefore aimed at proving the benefits, including the more tangible ones, of tagging corporate actions data from source issuer documents with XBRL data tags. The group contends that such a move would therefore improve the straight through processing rate by around 30%, thus resulting in key cost savings.

In July this year, the DTCC released the first set of drafts for its new corporate actions messages based on the ISO 20022 standard. The pilot, however, will not involve the reformatting of XBRL tags into ISO messages and dividend information will therefore continue to be sent manually.

There is another pilot programme planned for early 2011, which will focus on US-based issuers, according to Hands, but details are scant at the moment. The group has also not yet revealed the number or names of the other pilot testers in the programme and there is no formal timeline for completion.

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