by Edward C. Kelleher

DTCC's dual reengineering project, which encompasses the underwriting and corporate actions processing systems, is moving forward on schedule.

The new underwriting platform is set to launch this September and the corporate actions system will roll out in 2009 as planned. However, based on recent discussions with many customers, DTCC has made several important adjustments to the corporate actions system while giving firms more time and flexibility in switching to it.

"Our strategic vision for corporate actions remains the same - to produce a unified end-to-end processing system for the entire asset servicing lifecycle for all asset types and event classifications," said Patrick Kirby, DTCC managing director, Asset Services. "However, to allow for an easier transition for our customers, we have deferred several proposed features of the new system until a later date and extended the timeframes for customer uptake."

DTCC began reengineering its core underwriting and corporate actions systems last year. The rewriting of these legacy applications will deliver a single, new integrated platform that will introduce straight-through processing (STP) capabilities and provide greater flexibility for processing U.S. and global securities.

Key changes

Three of the most important changes on the corporate action front resulting from customer feedback are:

• Contra-CUSIPs will not be eliminated in the new system. The Depository Trust Company (DTC) will continue to provide contra-CUSIPs within the announcement and use contra-CUSIPs to segregate positions for processing purposes.
  
  
• While DTC will continue to move from a function code to an event-based system, it has extended the timeframes for the elimination of legacy files, which organize data reporting using the old function code methodology. This will give customers more time to make the transition to the new system's file layouts, which organize data reporting using the new event-based announce-ment methodology.
  
  Once the new system is implemented in 2009, DTC will support existing legacy files for another two years, after which they will be discontinued. DTC also will implement ISO 15022 and XML message formats, and customers can begin using these messaging standards at their own pace.
  
  
• As DTCC moves from the Participant Terminal System (PTS) to a Web-based browser with the corporate actions reengineering, it will work with customers to define data feeds that could replace functionality currently provided via "screen scraping." (Screen scraping is a technique in which a computer program extracts data from the display output of another program.)

STP remains a priority

"Ultimately, the goal is to develop our corporate actions system so that the industry benefits from the upgraded technology; at the same time, we want to make the cutover to the new system as transparent as possible to our customers," Kirby said. He added that the reasoning behind the reengineering adjustments was similar to that which guided DTCC after the industry postponed the move from T+3 to T+1.

"When the industry decided in 2002 to postpone moving the trade settlement time to T+1, DTCC redoubled its efforts toward STP. We recognized that achieving STP goals would substantially benefit our customers by creating greater efficiencies in post-trade processing and further reducing risk. We also knew it would position the industry for future decisions about a shortened settlement cycle.

"In the same way, we're moving ahead as planned with the implementation of the new corporate actions system in 2009, knowing that it will bring major STP efficiencies and reduce cost and risk to the industry. However, we have made some adjustments to the original plans in order to give customers more time and flexibility in making the transition. But the sooner they move to the new system, the sooner they will start enjoying its benefits," Kirby said.

Based on the modifications to the corporate actions system, DTC will be adjusting business requirements and specifications. As a result, the technical migration plan originally scheduled for release in June will now be released at the end of September.

Underwriting status

As mentioned previously, the new underwriting system will launch in September following testing with customers and service vendors this summer. It will automate and streamline the process by which underwriters submit new-issue eligibility requests.

This system will also introduce the New Issue Information Dissemination Service (NIIDS), which will fundamentally change how information about new issues is disseminated. NIIDS will distribute information in real time, making trade confirmation, clearing and reporting easier, faster and more accurate. @

[For more details on DTCC's new approach to corporate actions reengineering, visit www.dtcc.com/reengineering or contact your relationship manager.]