DTCC has begun to build a user base around its ISO 20022 real-time corporate actions solution following the addition of BNY Mellon to existing user Brown Brothers Harriman. Both participated, along with JP Morgan, in a DTCC pilot programme that began in 2010 and led to the introduction of the DTCC standard-based solution late last year. DTCC’s previous corporate actions solution used proprietary files and end-of-day batch processing.
The DTCC solution is part of a broader multi-year corporate actions reengineering project at the depository that will replace 60 legacy systems by 2015 with a single platform that is compliant with ISO 20022 messaging. This will provide clients with a single source of real-time corporate actions data, allowing them to eradicate manual tasks, reduce risk and increase the accuracy of corporate actions information. The ISO 20022 standard is a progression from ISO 15002 and increases messages from five to 13 to deliver more transparency and granularity.
BNY Mellon went live on the DTCC solution with mandatory corporate event announcements on July 30. Remaining event types, including voluntary corporate actions and more complex events, will be rolled out over the next four to six months.
According to Calvin Holmquist, executive vice president and head of global securities operations at BNY Mellon, which is using the DTCC corporate actions messaging solution over the Swift network, “By going live with corporate actions and the ISO 20022 messaging standard we are enhancing our client experience, reducing risk and enabling greater straight through processing (STP).”
Commenting on the custodian’s uptake of DTCC’s corporate actions solution, Susan Cosgrove, DTCC managing director and general manager, settlement and asset services, says: “BNY Mellon’s adoption of our corporate actions messaging solution represents a milestone for corporate actions in the US. With the industry moving toward one global messaging standard, multiple financial institutions will be able to take advantage of their current infrastructure to process corporate actions using the DTCC or Swift network. This will increase automation and transparency, reduce risk and boost efficiency and return on investment.”
Martin Kruse, managing director at BNY Mellon and head of global corporate actions, says that as one of the world’s largest custodians, BNY Mellon should be working on these kinds of development and joined DTCC’s pilot programme to help shape how the new solution would work and the benefits it would deliver to financial institutions and their clients.
While the transfer from DTCC’s proprietary corporate actions solution to the ISO 20022-based service is transparent to BNY Mellon clients, Kruse says: “The biggest benefit to our clients results from more timely and accurate data from the depository so we can deliver information more quickly. When corporate actions data is closer to real time, our clients can make better investment decisions. The standard also supports greater STP, which means better STP in our systems so there is less chance of error and we can deliver data more quickly.”
Acknowledging a reduction in operational risk, Kruse adds: “For me, the biggest risk is interpretational risk. Corporate actions announcements can be very complex and the data must be interpreted. This is why we have multiple lines of data scrubbing including DTCC and BNY Mellon scrubbing against other vendors’ data.”
While DTCC will offer both ISO 20022 and ISO 15022 corporate actions solutions in the short term, BNY Mellon intends to be totally ISO 20022-compliant before DTCC phases out the older technology in 2015. The custodian’s move to DTCC’s upgraded service follows Brown Brothers Harriman’s adoption of the solution in May 2012.