Corporate actions data cleansing solution provider Fidelity ActionsXchange has bagged its first customer of the year with the signing of Knight Capital Group’s clearing subsidiary Knight Clearing Services. Laura Pollard, executive vice president and head of Fidelity ActionsXchange, explains that the vendor has been working with Knight, which is focused on the trade execution and clearing space for broker dealers, for around a year on the implementation. Although this is a win for the more traditional end of Fidelity ActionsXchange’s business, the vendor remains focused on deliverables related to the expansion of its remit, Pollard tells Reference Data Review.
Knight Clearing Services is using the vendor’s ActionService platform to provide corporate actions information, such as corporate reorganisations, restructuring and mergers, to support the firm’s equity trading operation. Christopher Pento, managing director and head of Knight Clearing Services, explains that the solution was needed to improve the firm’s access to timely and accurate corporate actions information. “Through Fidelity ActionsXchange, we are getting access not just to data, but information that has been analysed and validated to ensure its accuracy – allowing us to respond faster to our clients’ needs,” he says.
Pollard reckons the quality and timeliness of the vendor’s solution was the reason it was selected by Knight over other vendors in the space. “But I think there is also a big people component also; we have really stepped our efforts to gather information and press releases in terms of corporate actions events,” she adds.
This requirement for complete and timely corporate actions information in order to prevent trade breaks will drive more firms to invest in solutions such as ActionService this year, she continues. However, the current economic pressure on budgets and the traditionally long sales cycle of corporate actions solutions means that these projects often take a while to get going.
“The implementation is much shorter than the sales cycle and with Knight this took between three weeks and a month. The implementation process is much shorter for web only rollouts because there is no downstream integration required,” she elaborates. With ActionService customers can opt for a web only option or take in a file from the vendor in addition to the web offering.
Pollard, who took over the helm at ActionsXchange in August 2008, has long been expounding the benefits of the vendor’s approach to corporate actions data and feels that being “proactive” and sourcing the data itself is the way forward. In October, for example, the vendor set up corporate actions events for the restructuring processes of around 300 different underlying bond instruments that resulted from restructuring actions taken by the CIT Group. On 1 October 2009, CIT commenced a series of offers to exchange certain outstanding series of notes and concurrently began a solicitation for votes for a voluntary pre-packaged plan of reorganisation.
“This proactive approach meant that we had the data before any of the commercial sources had time to provide it,” says Pollard. She is optimistic that this multi-sourced approach will prove popular in 2010 and says that the sales pipeline for the year in the UK and North America is promising. The vendor is primarily targeting asset managers and broker-dealers, but is also doing a bit of “exploration” in the mutual funds space.
“About a year ago we implemented a process for Fidelity whereby we could cleanse pricing for dividends reinvestments,” elaborates Pollard. “We were cleansing this information really early in the morning to prevent Fidelity from having to go into the market the following day without the prices. They wanted real time information so that they could reinvest the dividends at the appropriate day’s price.”
There is also an uptick in the notification and response component of corporate actions, according to Pollard, which means the vendor is still examining that space for the future. “There seems to be interest in not only the information but also the notification and response and the downstream processing of that,” she says. In addition to communicating the details of the announcement and when the meeting is going to take place, customers are also looking for the underlying information on the different voting options, she continues.
Fidelity ActionsXchange is currently still in the information gathering phase for these proxy voting details and is speaking to clients about their end requirements in order to refine that potential new product offering. The vendor has previously noted its interest in the proxy space, as well as a number of other non-corporate actions related data spaces and these therefore also remain on the agenda, says Pollard.
“It is preliminary but we are very serious about the proxy space because we have seen that the spend on corporate actions has increased year over year and we believe notifications and response will be a key area of investment,” she adds.
As well as proxy voting, there is also work going on around fixed income payment processing support, which is in a pilot phase with a client, and class actions remain a focus, says Pollard.
Entity data cleansing was a key talking point in October, but is perhaps something that is not an immediate focus for the vendor just now. To this end, the vendor is currently focusing more internally on Fidelity’s own entity data processing and seeing where is can add value, notes Pollard. “Certainly, this is in line with the way we develop our products by focusing on Fidelity and then going out to the market with a commercial approach,” she says.
Fidelity ActionsXchange has already had conversations with a number of (as yet unidentified) vendors in the space to better understand their capabilities, continues Pollard. “It is still exploratory at the moment as we are looking to see if there are potential partners out there for us to work on the information side,” she concludes. “The implementation is likely to be a longer term goal but it is a clear priority for us to explore in a research capacity this year.”