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DTCC’s Corporate Actions Transformation initiative introduces a major shift in the way The Depository Trust & Clearing Corporation (DTCC) communicates corporate actions information to its clients.

As the implementation of ISO 20022 for corporate actions messaging advances, two industry vendors, SunGard and TCS Financial Solutions, provide industry insight into the changes, benefits and challenges of DTCC’s Corporate Actions Transformation initiative.

“We believe it’s important to share the progress by those we are working with in the industry to implement ISO 20022,” said Rob Epstein, Vice President of Asset Services at DTCC. “We want both vendors and clients to have a better understanding of the changes being made, and how those changes are impacting others within the industry, with the hope that this information will allow all firms to make key decisions regarding implementation.”

Why is the DTCC Corporate Actions transformation initiative important to the industry and your organization in particular?

SunGard: SunGard’s review of the ISO 20022 standard for corporate actions design lends credence to the belief that the standard will reduce the inherent vagueness and interpretation risk of the MT56x suite of messages in the ISO 15022 standard. SunGard has deployed XML-based messaging in its own solutions and agrees that applying extensions to specific event information will reduce risk and increase efficiency for the entire financial industry.

TCS: TCS knows the initiative will bring harmonization of market practices at a global level and we welcome that. The industry will also see a significant reduction in risk along with faster automation of corporate actions processing. Additionally the engagement with the issuer community to make the necessary technological changes has been a key to the success of the initiative.

What do you want to tell clients regarding the changes taking place during the transformation and the movement towards ISO 20022 corporate actions messaging?

TCS: DTCC is improving workflow that in turn minimizes risk for everyone involved. The required data is provided from the source in the structured fields of the ISO 20022 messages. There will be less rekeying of the static data and that means there is a significant reduction for operational risk.

Have you encountered any challenges and if so have they been worked through; what challenges do you foresee with co-existence of ISO 15022 and 20022 from a vendor perspective?

SunGard: The major challenge for any application vendor will be to continue to support annual SWIFT Standards Release changes for both ISO 20022 and ISO 15022. However, as SWIFT plans to keep the two standards in sync regarding tag fields and message application, the effort should be manageable. In addition, once the agreement to entirely sunset the ISO 15022 standard has been made by SWIFT, ongoing maintenance and annual changes should apply only to ISO 20022. A challenge specific to the DTCC data that we have witnessed is the occasional discrepancy between legacy and ISO 20022 feeds; this is primarily due to timing.

What, if any, processes will be changing for your clients?

SunGard: The data compare and cleansing functionality has been streamlined as our test customers are taking direct feeds from DTCC in the ISO 20022 format. Customers will also benefit from the real-time delivery of the new DTCC feed.

Additionally, with the advent of DTCC's ISO 20022 messaging support, DTCC Clients will be able to submit instructions using standardized messaging to DTCC for the first time. As SunGard completes its planned development work, our customers will be able to manage the entire corporate actions processing lifecycle within the XSP solution and therefore eliminate the need for multiple systems. There would no longer be a need for one system to process the corporate actions and another system for submitting election instructions to DTCC. Users will be able to manage a single software solution with all communication between their firm and DTCC facilitated via ISO 20022 messaging.

What types of benefits are being seen with the implementation of ISO 20022?

SunGard: Through our customer testing, SunGard has seen a reduction in exception management at the event level. In addition, user workflow has been enhanced as less manual intervention is required. Announcements also seem to be better matched with their announcement type designation. Risk reduction and operational efficiency have been a couple of the key goals of the transformation are you seeing improvements to those goals?

TCS: Standard messaging will go a long way to reducing misinterpretation, miscommunication and errors throughout the corporate actions processing chain. It will also increase the timeliness and accuracy of Corporate Actions information. Aligning DTCC’s transformation with global standards provides an opportunity to further mitigate risk and reduce errors with the potential for future operational efficiencies.

Have you thought about how extension level information within the DTCC model could be utilized within your application?

SunGard: Based on the current project phase, SunGard is exploring ways to further utilize values found in specific tag fields in the ISO 20022 extensions; information that, in legacy DTCC feeds, would have been found in narrative and general information field tags and that required specific code to extract, interpret, and process. The introduction of new tag fields allows for the deployment of data analysis as the extensions have the capability to transform relatively static data to customer-driven contextual data.

How has engaging with DTCC during the Corporate Actions transformation initiative helped to implement these important changes that are being made?

TCS: Dialogue with DTCC has been open and effective. We have found DTCC to be very helpful in answering questions our clients pose. DTCC’s timeliness and accuracy of their responses has been very good. We look forward to engaging in future discussions with the DTCC team.

What are some upcoming goals for your organization in regards to the initiative?

TCS: TCS BaNCS for Corporate Actions product strategy is to align with all Market changes enabling organizations to streamline processes, improve data quality, reduce risk and manage costs. This is achieved by automating the processes involved in the complete lifecycle of Corporate Actions processing starting from Announcement Capture and extending to the processing of Entitlements, Notifications, Response and Instructions, Reconciliation, Payments, Tax and Claims. The goal is to continue to drive automation, provide exceptions and mitigate risk through user-configured workflow.

Can you speak to the flexibility that XML provides compared to the DTCC proprietary CCF formats?

SunGard: ISO 20022 is based upon business processes and concepts with supporting logical message models that are represented by XML. Therefore as an XML-based standard, ISO 20022 receives its schema and definition from the business, rather than being dictated to the business by the standards body. The business process or message model can be changed without having to change the underlying XML syntax. This flexibility both in terms of content and adaptability should facilitate easier processing, maintenance, and reusability.

As opposed to the CCF formats, the XML syntax also features enhanced structured data elements allowing for improved identification and representation of events. These enhanced data structures provide greater accuracy and risk reduction when that data is transferred between parties, and ultimately lead to greater straight-through processing (STP) capabilities.