The Corporate Actions Joint Working Group has finally released the results of its standardisation initiative, which is aimed at defining each category of corporate action in the market in order to allow for the harmonisation of processing rules. The proposals have now been drawn up and they have been sent out to the various national market practice groups (NMPGs) for consultation, says Paul Bodart, head of EMEA operations for the Bank of New York Mellon.
The working group has produced a finalised list of corporate actions categories including key dates, the sequence for those dates and the processing requirements for the various types of corporate action. The scope of the project encompasses all corporate actions and all parties in the corporate actions processing chain, including issuers, market infrastructures and intermediaries.
The group is hoping that once the revisions have come back from the NMPGs, the rules will be ready for market adoption by the second half of this year. “Changing market practices takes time and we understand that there are still some significant differences between markets,” explained Bodart to the delegation at last month’s Sifma Clearing and Settlement Conference in London.
He highlighted the differences between the US and European markets with regards to messaging standards: “The US has taken a different tack from Europe to standardise the delivery of corporate actions information. The Depository Trust & Clearing Corporation (DTCC) is working on it in the US and the Securities and Exchange Commission (SEC) has mandated that all prospectus information and proxy voting must use XBRL by 2011. In Europe, Swift is leading the charge with ISO standards.”
However, XBRL US, Swift and the DTCC are working together to ensure the future interoperability of XBRL with ISO 20022. “The work is being carried out in parallel but there is collaboration going on to ensure compatibility between the messaging standards,” he explained.
Bodart also put the project into context by discussing its place within the greater picture of European harmonisation and the goals of the Giovannini report. “We are working within the framework of Target2-Securities (T2S) and there is a need for a framework of processing rules to be adopted for the securities market at large,” he said.
The T2S project is a move towards the establishment of a single integrated securities market for financial services in Europe via a single platform for clearing and settlement for securities, in accordance with the Code of Conduct on Clearing and Settlement. The ECB claims that T2S will provide a single, borderless pool of pan-European securities and facilitate a settlement process. Market users will access these assets through central securities depositories (CSDs), which the central bank claims will accommodate national and regional differences between European countries.
Although T2S will require CSDs to outsource the clearing and settlement portion of their business to the ECB run utility, the processing of corporate actions will not be carried out on the platform. National and international CSDs will retain that function, for now at least.
The corporate actions standards will soon be made available for public consultation on the working group website or via the individual national market practice groups.