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Industry Focus on Risk May Result in More Investment in Corporate Actions Automation, Says Swift and CityIQ Panel

Despite the downturn in the markets, corporate actions automation has not fallen off the industry radar, according to speakers at CityIQ and Swift’s London seminar at the end of October. Rather than driving down spending, a reduced tolerance for risk provoked by recent events could instead encourage increased investment in corporate actions automation in the coming months, attendees to the event were told.

Alan Parsons, product manager at corporate actions system provider CheckFree, now part of Fiserv, commented on the view of these automation projects in the current market: “There is always going to be a need to automate corporate actions, and we are still seeing interest in doing this from certain business sectors, either using new or existing project money.”

Max Mansur, global market manager, asset servicing at Swift, added: “There will be less tolerance for risk, and firms will have less ability to hold back 15% of the budget to pay out corporate actions claims. Though it seems counter-intuitive in the current environment, we may see firms invest in more automation to reduce risk, and therefore the amount of capital they must set aside to cover losses.”

Many of the discussions during the events focused on the need for improved corporate actions data quality to better support STP. Simon Hughes, head of UK corporate actions, Institutional Fund Services in Europe for HSBC Securities Services, highlighted the issue: “The problem overall within the corporate actions world is that there is no trust. There is no confidence that the information we receive is always right. Our sub-custodians have to validate information against a couple of sources before they send it to us. We then validate it before we send it on to our clients. The clients then validate the data before they elect and send their decisions back to us. This process isn’t just going to go away. The consequences of getting something even quite minor wrong can be disastrous.”

Panellists agreed that Swift’s Simulation Testing and Qualification Service (STaQS), which was launched this year, was a step towards improving the quality of corporate actions messages. Another important development, participants agreed, will be engaging corporate event issuers in the process. If issuers and their agents were to disseminate information about corporate actions in a standardised format upfront, it would help to eliminate the problems created as different players interpret differently the information they currently receive from multiple, disparate sources.

There was much debates about how easy it will be to secure the involvement of issuers and their agents in the standardisation process. However, Swift’s Mansur was able to point to a concrete example of progress – the ISO 20022 issuer agent messages that will be available to communicate to Euroclear in 2009. This will be the first time registrars have an ISO standard message to send out to the marketplace, he said, and therefore represents a strong start to the process of engaging issuers in corporate actions STP.

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