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Risk Avoidance is the Cornerstone of the Corporate Actions Business in the Current Climate, Says HSBC’s Brock

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As the representative of global custodian community in the current market conditions, the focus of the industry is wholly on risk avoidance, Stephenie Brock, manager of technology and business solutions for corporate actions at HSBC Securities Services, told delegates to the CorpActions 2009 Europe conference. “Risk avoidance is in fact the cornerstone of the business at the moment,” she said, while speaking on the panel about data quality.

Risk is present in the misinterpretation of events or options, which can result in losses due to incorrect elections and late announcements, Brock explained. “One wrongly conveyed event can result in a US$5 million nightmare,” she continued. “This is why we need to make sure there is no ambiguity around the application of standards. This is becoming more complex as the more imaginative the events, the more risk is introduced.”

Dominique Tanner, head of business development at Six Telekurs, added that the data vendor has seen a surge in the requirements for data scrubbing as a result of the introduction of ISO 15022. Max Mansur, custodian services solution manager at Swift, seconded this notion and explained that Swift is working towards developing more market practice guidelines to assist in the application of standards. “There needs to be flexibility of formats for ISO 15022 messages because they have to cover 65 event types and many different markets, but this is where market practices come into play, to ensure consistency,” he said.

Brock highlighted the issue of a lack of standardised business entity identifiers as a key pain point for institutions, as they are required to spend money and effort trying to scrub that data. “There are different identifiers within different markets and sometimes it is even a struggle to find which body in a market issues these identifiers in the first place,” she elaborated.

Panellists and audience members alike agreed that it would be of benefit to the industry if Swift or another similar body could provide metrics on whether corporate actions message fields are correctly populated. This is not currently permitted due to privacy legislation, although Swift’s Simulation Test and Qualification Service (STaQS) is aimed at allowing institutions to test themselves against market practices, said Mansur.

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