DTCC Connection

May 03, 2010 • DTCC Connection

DTCC and SWIFT Complete Milestone Toward Messaging For Corporate Actions

by Steve Letzle


DTCC recently announced the release for public comment of a first set of drafts of corporate action announcement messages under its corporate actions reengineering initiative. The release of the draft messages is a significant step in transforming the way corporate action announcements will be processed in the U.S.


'This is a significant first milestone in our continuing, multi-year effort to fundamentally change how U.S. corporate actions are announced and processed.'– Donald F. Donahue, DTCC chairman and CEO


Working in collaboration with SWIFT, DTCC created its new corporate action messages based upon the recently released ISO 20022 (International Organization for Standards) corporate action message formats. The move to ISO standards as the primary format for corporate action announcement messaging by DTCC is a major step forward and away from the use of proprietary formats.


Single, global model

Currently, ISO messaging standards are widely used throughout the global financial services industry, as well as between custodial banks and investment managers in the U.S. By adopting the standard, DTCC and its depository subsidiary, The Depository Trust Company (DTC), are beginning to close the straight-through-processing gap by using a single, global model. DTC serves as the central securities depository for the U.S., holding about 85% to 90% of all U.S. equities, corporate bonds, municipal bonds and money market instruments.


The new model and message concept will form the basis of the eXtensible Business Reporting Language (XBRL) taxonomy that ultimately will allow issuers to directly and electronically communicate corporate action announcements around the global financial markets. DTCC is taking a leadership role in developing corporate actions messages and is working with SWIFT on the global implications.

Snapshot of SWIFT

SWIFT is a member-owned cooperative that provides the communications platform, products and services to connect over 9,000 banking organizations, securities institutions and corporate customers in 209 countries.


SWIFT enables its users to exchange automated, standardized financial information securely and reliably, thereby lowering costs, reducing operational risk and eliminating operational inefficiencies. SWIFT also brings the financial community together to work collaboratively to shape market practice, define standards and debate issues of mutual interest. To learn more, visit www.swift.com.


"This is a significant first milestone in our continuing, multi-year effort to fundamentally change how U.S. corporate actions are announced and processed," said Donald F. Donahue, DTCC chairman and CEO. "Whether receiving XBRL-tagged documents from issuers or communicating with our customers through ISO 20022 messages, a primary goal of DTCC's corporate action reengineering project is to help the flow of information between issuers and investors move more smoothly and with fewer errors, at less cost, using a single global standard."


Chris Church, chief executive, Americas and Global Head of Securities, SWIFT, added, "Working together towards automation and managing risks more effectively is the only way to solve the age-old processing problems of corporate actions. DTCC's commitment to this project, ISO 20022 and XBRL is a game-changer for the industry. We are excited about the milestone and we look forward to our continued work with DTCC as we help the industry realize reduced costs, eliminate risk and increase transparency of corporate actions announcements."


ISO formats

DTCC has released announcement and cancellation advice messages for corporate actions in ISO 20022 formats. The definitions used by DTCC, along with schemas and other format information, are available for industry review and comment in six separate documents on DTCC's web site. (Go to www.dtcc.com, click Thought Leadership, Issues and Initiatives, Reengineering.) Documentation supporting additional message types, including payment messages, is scheduled for release by midyear 2010.


DTCC used SWIFT's standards devel-opment utilities to develop the custom messages model and documentation supporting the ISO 20022 messages for corporate action announcements. This will provide a consistent model representation of ISO 20022-based messaging.


DTCC new messages also have been able to take advantage of ISO 20022's ability to communicate non-standard corporate actions data in a formatted manner and within the same message, something that does not fully exist in the current standard ISO 15022 messages.


"Although we have adopted ISO messaging, we still face a situation where about half of the data content is not covered in the message and, in fact, is not even in the ISO data dictionary," said David Hands, DTCC director of Product Management, Global Corporate Actions. "Therefore, we are using extensions to cover these situations in a consistent, standard format."


Hands noted that DTCC was continuing to work with SWIFT and National Market Practice Groups globally to determine what changes need to be made to further align the DTCC and ISO data models. @


[To learn more, contact David Hands, DTCC director of Product Management, Global Corporate Actions, at dhands@dtcc.com or 212.855.5894.]


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