Existing Regulation Could Spur On Corporate Actions STP, Aite Predicts

The lack of an explicit regulatory imperative to address the efficiency of corporate actions processing is often cited as a reason for the industry’s lack of progress towards this goal. While it’s true that efforts like Giovannini do include corporate actions, there is no specific directive or legislation that demands firms meet a standard for corporate actions STP. And there is also some confusion about the implications of different industry-wide efforts to effect improved corporate actions efficiency – about the overlap between, say, how Euroclear’s move to a single platform impacts corporate actions, and the work of the Securities Market Practice Group to instil best practices in this area.

While making this point, a new report from analyst Aite Group – Corporate Actions Market Overview: The Back Office Comes to the Fore – also makes the interesting observation that corporate actions could come under the scope of some existing and powerful regulation. The analyst speculates for example that if the best execution element of MiFID were to be extended even if just in spirit to corporate actions processing then an important customer service angle could come into play. Asset owners might start to demand of their asset servicers the best performance possible when it comes to corporate actions, in the same way as clients can now demand best execution for trades from their counterparties. Aite also points out that the Transparency Directive will impose best practices on at least the proxy voting element of corporate actions. Additionally, the analyst makes the point – which has also been made elsewhere – that there is an increasing demand from the front office for more timely and accurate information about corporate actions. This too could push firms to improve corporate actions processing, and relates to efforts we’ve seen recently from data vendors to provide more frequent updates of corporate event information.

Overall, Aite reckons, these factors are helping corporate actions to shed their reputation as a boring back office concern and climb right up firms’ agendas.