The Depository Trust & Clearing Corp. (DTCC) continues to push its proposals for the transformation of corporate action processing with the release of a blueprint plan that includes proposals for the development of centralised data cleansing and hub-based messaging.
Earlier this year, the DTCC launched its Global Corporate Action (GCA) validation service (see RDR, June) as a centralised “industry utility” providing an automated, centralised source of scrubbed corporate action announcement information.
The latest plan calls for industry agreement and support of best practices, and outlines specific initiatives it will launch to help achieve these practices.
Best practices proposed in the paper are:
· Standardising corporate action announcement information to ensure the availability of consistent, accurate information;
· Automating the creation and dissemination of corporate action announcements to eliminate manual processing and simplify communications;
· Promoting standards and best market practices to streamline processing;
· Promoting the automated exchange of instructions to reduce risk and cost; and
· Eliminating the use of certificates in the handling of corporate action transactions where these practices remain.
The proposal looks at the full corporate action life-cycle involved in processing, taking as its starting point the problems of obtaining accurate information. The lack of uniformity in announcements – press releases, tombstone ads, direct notification of shareholders – coupled with the absence of a single securities identification system have led to the industry practice of data scrubbing. This is, says the paper, “an inexact science due to its very subjectivity.”
James Femia, managing director, DTCC Asset Services reckons that the issues that affect each stage of the life-cycle mean that no one organisation or single approach can provide a complete industry solution. “Rather, a combination of global efforts by participants and industry groups will be needed to achieve the desired results,” he writes. Femia is leading DTCC’s initiative, and is seeking feedback from the published paper.
The paper provides a summary of DTCC’s key initiatives on corporate actions, including the development of the GCA service and the proposed a Global Corporate Action Hub, billed as a flexible, real-time messaging solution that will automate and centralise the point-to-point exchange of corporate action information that takes place among investment managers, banks and broker/dealers in all markets.
The DTCC is also working on the development of enhanced instruction processing feeds, and the elimination of paper certificates for corporate action transactions in the U.S.
In 2002, a record volume of nearly $1.9 trillion in reorganisation, redemption, dividend and interest payments were processed by DTCC.
The full paper, Transforming Corporate Action Processing: Providing A New Level of Risk Management and Achieving Straight-Through Processing can be found at under the heading “Thought Leadership”.