White Papers

May 03, 2004 • White Papers

OXERA REPORT - Corporate Action Processing: What are the risks?

Sponsored by: The Depository Trust & Clearing Corporation
Oxera Executive Summary

Why corporate actions are important to the securities industry

Corporate action events are an integral feature of today’s capital markets. They take place whenever changes are made to the capital structure or financial position of an issuer of a security that affect any of the securities it has issued. Rights issues, tender offers, conversions, takeovers, mergers, early redemptions and dividend payments are just a few examples.

Close to 1m corporate actions take place every year worldwide.1 A single event may involve hundreds of different market participants (including custodians, fund managers, broker/dealers and depositories), ultimately cascading down to thousands of investors. Each of these participants faces high risk because corporate action processing is complicated, deadline-driven, not standardised, and to a large extent still manual.

In the past few years, concerns about corporate actions have been raised by, among others, the Group of Thirty, the Giovannini Group, the Committee for European Securities Regulators and the European Central Bank. These organisations have advocated bringing greater efficiency and standardisation to corporate action processes, and some industry initiatives have been launched to work towards these aims. This reflects an increasing awareness in the securities industry that corporate action processing involves significant risks, and that corporate actions are not just a ‘back-office’ issue but also have an impact on trading strategies in the front office, and the efficiency of capital markets more broadly.

To date, however, there has never been a systematic and quantitative analysis of the risks related to corporate action processing in the global securities marketplace. This Oxera study is a first step towards such an analysis.

DOWNLOAD THE WHITE PAPER: Corporate Action Processing: What Are the Risk?

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