SIS SegaInterSettle has released plans automate the messages it receives from issuers and to introduce a record date for corporate actions in the Swiss market by November next year. The plans are part of a wider project launched by Swiss Financial Market Services (SFMS) to promote automation in the domestic securities industry.
The Swiss CSD’s plans for the automation of issuer communications will bring the domestic infrastructure into line with the European standards for the harmonisation of entitlements. To this end, SIS SegaInterSettle says that it aims for issuers or their agents to enter corporate actions data directly into a web interface, which would then be transmitted to the CSD.
Martin Drube, chair of the Swiss Market Implementation Group, explains: “Currently, for corporate actions from Swiss issuers we receive information largely via fax and this information isn’t always reliable so we always have to compare it with information from Telekurs, for example. From next year we will be allowing issuers to enter the information directly into our system themselves.”
Drube says that every issuer will be given access to the web-based solution and this measure will allow the CSD to eliminate the manual effort involved in entering entitlements. “The solution will go live in January next year but it will only be used by the Swiss exchange for listed companies,” he adds. “The education of the market on how to use the system will be done by the people from the Swiss exchange.”
The system will be enhanced in November 2009 for both listed and unlisted companies and the data will not only go to the Swiss exchange at that point, it will also go to SIS SegaInterSettle so that it can be uploaded into the system, as well as Telekurs, explains Drube.
“It will take a year and a half for the solution to be implemented because it will also take time for the banks to prepare for it. It will be beneficial from their point of view because the information receive from us on corporate actions also needs to be checked due to the manual processes involved and it will be much easier to receive it directly from issuers in terms of cost and risk,” he says.
“Almost all the banks are enthusiastic about the project,” adds Drube, “because corporate actions require a lot of effort from the banks; around 30 to 50% of their time is spent taken up by the task of manual processing.”
At the same time as this automation process is implemented, SIS SegaInterSettle is also introducing a record date for corporate actions in the domestic market. After implementation of the record date, positions entitled to dividends will no longer be determined on ex date, or the first day the shares are traded without dividends, but only three working days thereafter. This will also apply to all other corporate actions. As a result, so-called crossex compensations will be largely avoided, making complex and expensive corrections obsolete.
“The record date will help to validate that the issue date follows after three business days and it will reduce the number of market claims in the marketplace. Currently we have around 300,000 market claims for the Swiss market, but this should be reduced to a few thousand a year after the record date and result in considerable savings,” says Drube.
These plans are part of the SFMS’s wider project to provide companies with a portal where all information on a security can be entered electronically and distributed to different receivers.