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by Edward C. Kelleher

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  • DTCC Publishes Updated ISO 20022 Specifications for Corporate Actions Processing

  • Corporate Actions Reengineering

  • Patrick Kirby, DTCC managing director of Asset Services, recently met with @dtcc to discuss DTCC's corporate actions reengineering initiative, provide a progress report on its implementation and talk about the benefits the reengineering will bring to the industry.


    Can you give us some background on why the reengineering initiative is such an important development for the industry and corporate actions processing?

    Patrick Kirby, DTCC managing director of Asset Services

    DTCC plays a critical role in processing virtually all corporate actions affecting equities and corporate and municipal bonds in the United States. Each year, we handle millions of corporate actions ranging from cash dividend and interest payments to corporate mergers and reorganizations. In 2010, we processed corporate actions involving more than $3 trillion.

    We developed our current corporate actions processing platform over many years with different systems created to meet specific needs. In that time, the processing of corporate actions has become increasingly challenging. Today, the nature of events is more complex and the needs of our clients have changed. We needed a new system that would dramatically boost efficiencies and reduce cost and risk. The reengineered corporate actions platform will achieve these objectives by upgrading and replacing many of the existing 60 legacy systems. It will automate and streamline the process with a single new platform that will handle increasingly sophisticated types of securities, both domestic and international.

    Can you tell us where we stand in implementing the new system?

    Because of the size and complexity of the initiative, we are implementing it in several phases over the next four years. You have to realize this involves work not only on the part of DTCC, but on the part of our customers and vendors as well. They will need time and resources to meet the new requirements that come with the reengineering. For DTCC's part, we are looking at a total overhaul. We're introducing a whole new system for corporate actions with ISO 20022 messages, a new browser-based user interface and the XBRL tools needed for issuers to communicate with us.

    [Note: XBRL is a technology that allows issuers to electronically tag financial information in a standard format, which then permits recipients of the information - DTCC and financial firms - to re-transmit that information to investors without having to re-key it into their systems. In the U.S., the Securities and Exchange Commission (SEC) has mandated the use of XBRL for the largest public companies' financial statements.]

    What kind of headway did you make in the past year?

    We made substantial progress in 2010 on several fronts. We posted on our website a corporate actions RoadMap and Timeline, along with a detailed list of technical documents and specifications covering legacy files, ISO 20022 messages, corporate action scenarios and related items. Working with SWIFT, we also released for public comment ISO 20022-compatible corporate actions announcement messages that will help support the entire lifecycle of a corporate action.

    We subsequently posted revised drafts of the announcement messages after incorporating industry feedback we gathered from several workshops with SWIFT and custodian banks. We also vetted the messages with The International Securities Association for Institutional Trade Communication [ISITC], an industry group that promotes straight-through processing.

    Sibos, an international financial services forum sponsored by SWIFT and held in Amsterdam last September, gave us the opportunity to address the global corporate actions audience. Dan Thieke, a vice president in Asset Services, participated in a panel discussion outlining our work with and our expectations for ISO 20022 messaging, and I took part in a panel discussion on XBRL and its use in the U.S. and Europe. We received lots of good, constructive feedback from both sessions.

    What were other milestones in 2010?

    We demonstrated our new browser-based user interface to more than 1,000 customers in 50 webinars and it got the thumbs up across the board. Customers were particularly enthused that the browser incorporates all event types - distributions, redemptions and reorganization - into one system with a dashboard for each event type. This, in effect, gives users a unified corporate actions platform. One customer described it as "the most developed prototype of its kind that we've seen" - and that's a direct quote.

    Our Global Corporate Action Validation Service (GCA VS) significantly increased the number of securities it covers. In addition to corporate action announcement information from 160 countries worldwide, customers can now obtain scheduled payments information on all structured securities held by the Federal Reserve Bank, as well as scheduled interest payment and maturity data on a large number of fixed income securities that are not currently DTC-eligible from around the globe.

    We also completed a detailed business case on corporate actions with SWIFT and XBRL US that made key recommendations on corporate actions processing which we're now implementing. The business case recommended adopting a single set of global information and technology standards, tagging corporate actions documents in the XBRL format and disseminating corporate action information electronically, as close to real time as possible. The business case pointed out the major benefits these recommendations would bring, including a saving of more than $172 million annually to investors and investment managers.

    Can you tell us what DTCC plans for corporate actions in 2011?

    We will be launching two test pilots in April, starting with a pilot of the ISO 20022 announcement messages. At the conclusion of that pilot, corporate action customers can begin using the ISO 20022 announcement messages at any time. Eventually, all firms using our corporate actions files will have to switch to the ISO 20022 system to receive corporate action information, but we are providing a long transition period. As I've said, DTCC will phase in its corporate action reengineering over the next several years, with the goal of retiring all legacy file formats on or before 2015.

    The second pilot involves the browser-based user interface for corporate action announcements, which we will implement in phases. We will commence distributions for dividend and interest payments and redemptions in 2012, and reorg in 2013.

    We expect to be able to offer connectivity to issuer-based XBRL tools at the end of 2011.

    What are the next steps for the ISO 20022 messages for entitlements, elections and payments?

    We'll continue working with SWIFT and the industry in the coming months to define the messages that will complete the lifecycle of a security, and we'll phase them into the reengineering initiative during the next three years.

    What are your plans for helping customers transition to the new system?

    Throughout the year, we'll continue working with customers to help them transition to the reengineered system, encouraging them to participate in corporate action webinars and to watch the latest webcasts. We'll also visit our customers throughout the year to listen to their concerns, answer questions and talk about the benefits the new system will bring to them and to the industry. @