Four years ago, South African central securities depository (CSD) Strate launched its project to automate its equity corporate actions processing and, a year later, in September 2008 it engaged the services of Tata Consultancy Services (TCS) to develop the new system. Following a period of development and testing, the system has now gone live and the CSD has benefitted from the elimination of manual processing and the related efficiency gains and cost and risk reductions, according to Eli Lechtman, project manager at Strate.
The focus of the project, which involved a team from the CSD’s corporate actions department, IT and TCS, has been to automate as many of the CSD’s manual corporate actions processes as possible in order to mitigate the risks involved in this space for the South African market, as well as to bring it into line with 15022 standards. It is also all part of the wider drive within the country’s equities market to move towards a T+3 settlement cycle, which is being spearheaded by the Johannesburg Securities Exchange (JSE).
Lechtman explains that the CSD’s internal team used workshops and discussion groups with industry practitioners to agree and develop the message formats for the South African market. This work took up most of 2007 and the first half of 2008, before TCS was engaged to begin to build a new system to meet these requirements.
Last year, saw the team work with the vendor to develop and test the new system in order to check that it met the requirements of the brief and the wider needs of the market. Strate also provided regular updates to domestic market participants to ensure that they were able to begin the market testing process on time. The go live for the system was early April this year and, according to Lechtman, the main benefits have been a reduction in cost and risk, combined with greater efficiency for the market.
The CSD has since managed to process dividends on unlisted instruments using the new system and payment exclusions can now be processed on payment dates, rather than at a later date, ensuring that the relevant messages are sent to the affected parties automatically. The corporate actions process is therefore fully streamlined so that the system automatically signs off events once they have been completed and fees are automatically generated.
Lechtman notes that outside of these main benefits, Strate has realised a number of other efficiencies such as the fact that it is able to capture additional instruments such as exchange traded funds and warrant rollovers automatically. The CSD is also able to adjust holdings before pre-advice messages are sent so that it can send correct eligibility and entitlement calculations to its customers. Rates can also be amended up to one business day before payment date, whereas previously they could only be amended up to record date minus 1.