ACSDA General AssemblyPanel 2 – Asset Services

Dan Thieke

Brett Lancaster

Friday 25 March, 2011

v03

Brett LancasterManaging Director – Americas Securities

brett.lancaster@swift.com

Dan ThiekeVice President – Asset Servicesdthieke@dtcc.com

Corporate actions remain one of the most risky areas within financial services

Issuers fulfill their obligation by sending out a document, written in free text, causing issues

Agreeon eventtypes?

Agreeon data

elements?

Agree on source

dissemination?

Agree on a unique ID?

Prospectus’Press

releasesLetters oftransmittal

Regulatoryfilings

Along the chain, from issuer to the investor, data is keyed and re-keyed manually, causing errors

With the recent financial crisis, clients tell us that the operational risks need to be managed

InterpretationRisk

Issuer messages are written in “free text, e.g. news release and regulatory filing, that must be translated and rekeyed by the financial services industry

TimingRisk

Need for manual intervention results in delays in communicating information to the end investor

AccuracyRisk

Multiple players disseminating the same information results in uncertainty as to the accuracy of the result. Translation and manual rekeying increases the potential for errors

SignificantCosts

The lack of straight-through processing throughout the corporate actions chain results in additional cost and liability being absorbed by the financial services industry

http://xbrl.us/i2i/Pages/default.aspx

Risks

However, the planets have aligned to allow us to finally sort out the problem … at least for the U.S.

What’s it all mean? Savings …Financial Crisis

DTCC CA Re-engineering

ISO 20022

XBRL Maturity

Maybe, just maybe …

DTCC is working with SWIFT to implement ISO standards for Corporate Actions

• DTCC is the world’s largest central depository– Within Asset Services, it represents ~4,000 Participant accounts– DTCC publishes ~20M unique Corporate Actions to its

Participants, per year– In 2009, DTCC collected and paid ~$3T in Corporate Actions

• SWIFT is the Registration Authority for ISO standards– Used by 9,500 firms across 209 countries– Has 88% penetration for Americas Buy-Side, by AUM– Has 96% penetration for Americas Sell-Side, by market cap

• DTCC is working with SWIFT to implement its new Corporate Actions platform using ISO 20022

– Supports the entire lifecycle - all event types, all asset classes– Mandatory cutover from proprietary formats by 2015

DTCC Corporate Actions Re-engineering features were defined by the industry, for the industry

SingleEvent

Record

Unique CA Identifier

Delivery Over

SMART orSWIFT

Near Real-Time

Events

AutomatedElections & Payments

SupportsU.S. andGlobal Events

GUIIntegrated Across CALifecycle

CA Re-engineering Features

XBRL allows the issuers to disseminate electronic data from the source

• XBRL revolution– XBRL is an international, non-profit, consortium dedicated to

driving transparency– XBRL enables issuers to tag data from within MS Word when

preparing the source document– Some tools allow the tagged data to be ‘embedded’ within the

saved pdf or doc file– Aside from tagging, the issuer, as they write the press release

or prospectus, follows the same process as they do today• A range of XBRL tools are commercially available

• XBRL alignment with standards– DTCC, SWIFT and XBRL-US have worked to seamlessly align

the XBRL taxonomy used in the tools with ISO 20022

300 page S-4 SEC Paper Filing Tagged and Structured Data

XBRL enables free text to be structured to the ISO standard and enables electronic dissemination

Highlight the text then ‘drag & tag’ the data element

Our roadmap is phased with milestones to reduce implementation risk. We have already started

Phase I All DTC-specific data elements for payments incorporated into new platform

Phase IIa Corporate actions announcements Pilot with ISO 20022 & new customer interface

Phase IIb XBRL Interface into DTCC for dividend announcements

Phase III End-to-end lifecycle for distributions events covering announcements and processing, including unique ID

Phase IV End-to-end lifecycle for redemption events covering announcements and processing, including unique ID

Phase V End-to-end lifecycle for reorg events covering announcements and processing, including unique ID

Phase VI All DTC and GCA proprietary files and ISO 15022 files will be retired

Oct ‘09

Apr ‘11

Q4 11

2012

2012

2013

2015 or sooner

The initial ‘announcements’ pilot starts Apr 23 with BBH. Separately, Citi are already piloting XBRL

Pilot Clients

The industry is aligned to deliver significant benefits for all intermediaries along the chain

Issuers

• Intent and content of the originating offer are clear to the investor, without fear of misinterpretation due to manual manipulation

• Details are conveyed in a timely fashion

• Issuers will incur marginal additional effort in tagging the data

Sell-Side Intermediaries

• Lowers risk exposure to an investor decision based on incorrect information

• Interpretation, re-keying and manual exceptions are significantly reduced, and STP rate increased

Buy-Side Investors

• Make decisions based on guaranteed accurate information from ‘source’ document

• Longer response time as Custodians and IMs no longer need to artificially compress deadlines to compensate for manual processing of election information

Qualitative Benefits

The industry has quantified the expected gains in operational efficiency - the benefits are tangible

What’s it all mean? Savings …Overall savings

Sell-Side savings

Buy-Side savings

Improvement in STP rate

$230M

$400M

$170M

50%

80%

Other Asian XBRL projects report actual error rates falling by x100 fold

Quantitative Benefits

Toronto19-23 Sep 2011