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A-Team Insight Blogs

Virginie’s Blog – Does Corporate Actions Data Have a Place in a Utility?

The same old discussions about STP and standardisation in the corporate actions space may play out year after year (see my recent blog on which here), but one interesting (and newer, if not entirely new) idea discussed at last week’s CorpActions 2011 conference was the concept of corporate actions event data being stored in a utility. The idea may have been nixed by Bottega and Powell in their latest legal entity ID (LEI) paper for being too costly and labour intensive for the Office of Financial Research (OFR) at the outset (see news on which here), but the industry may have an appetite for some form of centralised repository of referential corporate actions data.

The recent LEI report by Bottega and Powell suggests that not all corporate actions data should be included in the OFR database because of the high cost of collection and maintenance. It states: “There do not appear to be compelling arguments that most corporate action data would be helpful in identifying entities or in monitoring systemic risk. Therefore, other than in the cases in which a corporate action results in a change to the LEI, maintaining these data as part of the reference data or operational metadata would likely be burdensome and provide limited benefit for these purposes.”

However, just because it wouldn’t be as useful for systemic risk tracking purposes as other reference data items, doesn’t mean that it wouldn’t be useful for market participants engaged in other endeavours. Colin Webb, senior manager for corporate actions at Fidelity Investments International, noted last week that the development of a new standard that could act as a single reference point for individual corporate actions events would be valuable. An industry or market level reference point for events could enable firms to reconcile data much more easily.

John Kirkpatrick, managing director for Global Asset Servicing at Citi Global Transaction Services, added that any such move would require the intervention of regulators. He pointed to developments in the Spanish market where the custodian community and central securities depository (CSD) asked the regulator to step in and mandate how various corporate actions dates should be set as an example of how this regulatory driven standardisation could work.

This desire for regulatory intervention in the world of data standards has been a common theme among those from the data management community over the last couple of years. By adding regulatory teeth to an industry driven standard, the logic is that change will be much more likely to happen and standards will be adopted by the majority. Of course, this is not always the case in individual markets, let alone on a regional or global level (just look at the patchy implementation of MiFID across Europe, for example), but it does give the community greater hope than going it alone.

However, much like the challenges ahead for a reference data utility, a lot of obstacles could stand in the way for a similar endeavour in the corporate actions space. Who would take charge of establishing and maintaining such a repository? Would the industry pay for it (especially with so much else going on)?

Swift and DTCC would be the most likely candidates to get involved in any such endeavour, given their stated interest in the corporate actions market and the XBRL initiative they are both engaged in. Moreover, their evident recent predisposition towards setting up data infrastructures (see commentary on which here) would stand them in good stead to add a corporate actions event repository to the roster.

Any such moves are unlikely to happen quickly, but it is certainly something to keep an eye on in future, especially if XBRL gets the traction Swift and DTCC are hoping for.

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