By Tim Lind, Managing Director of DTCC Data Services.
We live in a deeply networked society. Information sharing has moved from primarily one-to-one communication to global networks where data and information is shared instantly and broadly. Across financial services, many organisations continue to advance their communications approach; however, integral corporate actions event data, such as details around dividends, stock splits, mergers and acquisitions, remain disconnected and disjointed, moving through the markets point-by-point increasing processing times and decreasing event data accuracy.
The origin of the corporate actions information sharing process still relies on manual PDFs, faxes or other unstructured documents. Data is extracted from those documents by Central Securities Depositories and distributed across custodian banks, software platforms and data vendors on its way to beneficial owners. The primary challenge is that all data is fragmented through various point-to-point connections, needing to be reconnected and reconciled by every player in the supply chain
Corporate actions data impacts every system that processes securities and is a foundational component of global financial infrastructures. Yet, fragmented distribution methods create latency and ambiguity, which has an impact on trading, index administration, reference data management and every system that must be updated based on the terms of the event. As a result, market participants are forced to manage unnecessary reconciliations to gain an accurate view of event activity. At the same time, current processes create data siloes across organisations that limit consistent interpretation, resulting in firms being unable to harness the full data set and endure excessive costs and risks.
To address long-standing data issues, corporate actions event processes must be transformed to bring issuers, custodians and investors into the same platform or network. Market infrastructure providers offer a unique vantage point and ability to drive this change by delivering solutions that advance standards, automation and a connected community. The goal? To deliver a networked ecosystem that reinvents how data flows, removing manual point-to-point processes and replacing them with a structured data platform and promotes standards accuracy, efficiency and transparency.
Automation through emerging technologies
The path to delivering this transformative platform will take time, but it is possible, and it is likely that emerging technologies will have key roles to play. While it is important to note that the industry has made significant progress in automating the extraction of corporate actions data from unstructured sources like PDFs, delivery mechanisms remain largely manual and fragmented. Because of this, market participants receive information in pieces and need to re-construct the data – a time-consuming, error-prone and inefficient process leading to increased duplications, misinterpretations, costs and up to weeklong processing delays. This is where emerging technologies, like cloud, artificial intelligence (AI) and distributed ledger technology (DLT) can help.
Cloud-based platforms allow for scalable storage, elastic processing power and integration of data into legacy transactional systems. Cloud infrastructure supports timely data ingestion and sharing of data, ensuring market participants have prompt access to events like mergers, rights issues and dividends. Also, cloud environments can enable secure, permissioned data sharing across securities issuers, custodians and asset managers, helping eliminate data siloes while reducing the need for manual reconciliation. Data can be transformed from a static record into a continuously available strategic resource.
From an AI perspective, the technology is poised to address one of the most persistent challenges in corporate actions – the unstructured nature of source documents. Corporate actions often originate in dense, inconsistent formats such as prospectuses, regulatory filings or corporate disclosures that must be interpreted and structured manually. Natural language processing (NLP) and machine learning (ML) models are improving methodologies to ingest and categorise data at scale to expedite the extraction of key event data. When paired with rule-based validation to flag anomalies in the data, these models can reduce operational overhead and errors while improving data quality across the lifecycle of an event.
Finally, DLT offers a way to automate corporate actions processing across market participants by enabling transparent record-keeping on chain. With a shared, immutable ledger accessible only to permissioned entities, DLT can help deliver secure, synchronised records visible only to permissioned participants, offering a compelling foundation for issuers and investors to streamline proxy voting, entitlements processing and event confirmations. Corporate actions may trigger downstream events like posting of cash or changes in ownership position. Smart contracts will embed and activate different workflow processes that are impacted by corporate actions and start to systematically synchronise ancillary functions based on the terms of the event.
Together, these technologies can reduce latency, eliminate duplicative processes, and enhance transparency, allowing firms to move from managing fragmented datasets to unlocking untapped operational and strategic value. By combining cloud infrastructure, AI-driven data extraction and DLT’s secure centralised on-chain capabilities, firms can benefit from an accurate, real-time view across the corporate actions event lifecycle.
Unlocking the Network Advantage
Corporate actions data has typically been viewed as a back-office challenge rather than another data asset to better understand the issuer. That narrative is evolving, as firms realise the strategic value this data can provide to front office and clients service functions, from enhancing client reporting to portfolio analytics to uncovering arbitrage opportunities while improving data insights.
When timelier and more accurate corporate actions data is centralised and made available across the lifecycle, it will create new opportunities to inform trading strategies, reduce asset servicing fees and improve investment performance. Agents and issuers can only access these advantages if they embrace network-based distribution, while leveraging centralised platforms and emerging technologies.
Failing to innovate in this space is not sustainable in today’s market. It is essential for organisations to embrace automation, modernisation and standardisation to meet the needs of counterparties and clients in an ever-evolving landscape and to remain competitive. Messaging standards have automated many simple events on processes but are not a solution to fragmented communication. Market infrastructure firms, tech providers and financial institutions are starting to rethink processes that haven’t fundamentally evolved in 30 years to re-invent the corporate actions event lifecycle and usher in a new, digital and interconnected process that meets their needs today and as markets continue to grow.
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