Difficult, dull and deadly – that was how corporate actions were described at a breakfast seminar held by CityCompass earlier this month. Of course, we don’t necessarily agree with the full statement, but difficult they certainly can be.
Progress is being made, however, towards the automation of corporate actions processing, reported participants of the event. Various industry groups, which are working to raise the profile of the issues and issue best practice recommendations, and are increasingly collaborating with each other, and even one or two solutions to some of the identified problems have been proposed.
But despite the progress, these recommendations and proposed solutions require the participation of key industry participants down to the issuer level, without which not all the progress can be realized, agreed speakers at the event. Tony Kirby, secretary of the U.K. Reference Data User Group (RDUG), said that any standardization “needs to be inclusive and involve issuers, issuers’ agents, and end investors”.
Questioned by CityCompass principal Gary Wright on the frustration that Swift might be part of the problem as well as part of the solution, Catherine Marks, Swift’s business manager, asset services, suggested that perhaps there had not been enough appreciation of Swift’s efforts so far. “We have got the data providers to agree and adopt a standard (ISO 15022 for corporate actions). And we’re working with exchanges, including the London Stock Exchange in an effort to drive the work further back the chain to the issuers.” Lead a horse to water… But she pointed out that despite the effort made, and the benefits of using the service, take up of the ISO 15022 formatted data via the London Stock Exchange and some vendors was not being adopted by the industry. “Why not?” she asked.
Marks reported that one bank using the data in standard format and had said the “quality was excellent,” but this has still not proved enough to move clients to the standard.
But it’s not all doom and gloom. According to FT Interactive Data’s Nat Sey, the top three corporate actions account for 53% of traffic on their network. As Kirby said, “If we can address those corporate actions, we’ll be part of the way there”.
RDUG reported progress through its published papers, discussions with issuers, and work with stpsolutions’ Andrew Chilcott on a possible solution using Adobe Acrobat. The solution, demonstrated at the event, involves adding structure in the form of the ISO 15022 format to regulatory announcements using XML coding within the Adobe Acrobat program to create “a single version of the truth”. When the announcement is submitted, a Swift message can be generated.
The technical capability is there, and could eventually extend to using the accounting XML standard eXtensible Business Reporting Language (XBRL), said Chilcott, but market acceptance is a long way off. An obvious way to deploy such a solution would be for the Primary Information Providers (PIPs), who collect and disseminate regulatory announcements in the UK market, to deploy templates that their users would access when creating regulatory announcements.
Unfortunately, the PIPs are unlikely to act unless they receive pressure from their clients, the issuers. The London Stock Exchange, which still holds around 90% of the regulatory announcements market with Regulatory News Service (RNS), doesn’t believe they are currently in a position to pressure issuers, according to its reference data product manager Giles Arbuthnott.
Mike Jones, director at CityCompass, suggested another solution; “If for example Bank A got its custodian arm to talk to its investment bank division and asked them as issuers to provide their data in a format that would help the custodian arm reduce manual input, errors, cost and reduce risk overall, wouldn’t that solve a lot of problems?”
Engaging with Europe RDUG also plans to improve its dialogue in Europe after criticism for not being focused enough on Europe. As such, it is engaging with European bodies, including the European Banking Federation and ECSDA. RDUG’s Corporate Actions Working Group (CAWG) was set up in June 2002 after considering whether corporate actions could be considered reference data and therefore fall under RDUG’s remit. Says Kirby, “We decided that given its impact on trade data, they must be considered reference data.”