global corporate actions acsda leadership forum october 9 th 2007

Global Corporate Actions

ACSDA Leadership Forum

October 9th 2007

David Hands

DTCC SolutionsProduct Management

Dan Lu Nanjun Deng

Yingman Jiang

GCA VS Operations Shanghai

Global Corporate Actions - ACSDA Leadership Forum Oct 9th 20072

Global Corporate Actions: A global challenge that CSDs can play an important role in developing solutions

Agenda

• A look at Global Corporate Actions

• Complexity of Global Corporate Actions

• DTCC Solutions - GCA Validation Service

• The role ASCDA can play in Global Standards

Agenda

• A look at Global Corporate Actions

• Complexity of Global Corporate Actions

• DTCC Solutions - GCA Validation Service

• The role ASCDA can play in Global Standards


Corporate Actions cover all parts of the globe with different levels of complexity and volumes

• GCA VS announces more than 900,000 Corporate Actions yearly

• North America leads the world in the number of Corporate Actions announced* yearly ~70%

• Cash Dividends is the dominate Announced Event Type ~30%

• GCA VS announces more than 900,000 Corporate Actions yearly

• North America leads the world in the number of Corporate Actions announced* yearly ~70%

• Cash Dividends is the dominate Announced Event Type ~30%

Source: GCA VS – DTCC Solutions (July ’06 – August ’07)

* Announced events does not include scheduled payments (eg Bond Interest)

Highest market volume of Global Corporate Action Events

0%1%2%3%4%5%6%7%8%9%

10%

US/Canada

AsiaEurope

South AmericaCentral America

Africa

Middle East

Simple Distribution Events

Mandatory Events

Redemption Events

Complex Distribution Events

Voluntary Events

Highest volume of Global Corporate Action Event Types

0%

10%

20%

30%

40%

Cash Dividend

Income Distribution...Partial Call Redem...

Full CallMeeting

Cash Dividend ARPReturn of Capital

Dividend Omitted/R...

Name ChangePut - VoluntaryAll other events

US/CA = 54.8% (Scale adjusted)


Time and effort required to process a Corporate Action announcement (Benchmarked against US/Canada)

Volume vs Complexity - Corporate Actions By CountrySource: DTCC GCA Validation Service, data 1 to 30 September 2004

1

10

100

1000

10000

0 5 10 15 20 25 30 35 40 45 50

Corporate Action Announcement Effort (Relative) and Volume

(Relative) by Regional Average



US/Canada

Asia

Europe

Central America

Africa

Middle East

South America

Rel

ativ

e V

olu

me

Relative Effort

Volume vs Complexity - Corporate Actions By CountrySource: DTCC GCA Validation Service, data 1 to 30 September 2004

1

10

100

1000

10000

0 5 10 15 20 25 30 35 40 45 50





US/Canada

Asia

Europe

Central America

Africa

Middle East

South America

Rel

ativ

e V

olu

me

Relative Effort

Markets that are more mature and have higher volumes are relatively easier to validate the terms of the Corporate Action


Corporate Actions can be complex and extend over a period of time, thereby, increasing risk to ALL Parties

• A UK Rights Issue can go through many stages requiring timely notification and action all of which increase risk

• The Rights Issue can last for a couple of months before the event reaches its conclusion

• A Rights Issue may not go through all these stages which adds further complexity

• A UK Rights Issue can go through many stages requiring timely notification and action all of which increase risk

• The Rights Issue can last for a couple of months before the event reaches its conclusion

• A Rights Issue may not go through all these stages which adds further complexity

Company Announces

Issue Expiration & Pay Date

Renunciation & Registration Date

New Shares Posting Date

Last day for trading Nil Paid Rts and Splitting

Nil Paid Rights

Record DateEx Date

Day 0 ~ Day 75

~ 5 Days before ex

7-21 Days ~ 7 Days2 Days

Fully Paid Rights Ordinary Shares

1 Day 2 Days

Last day for splitting Fully

Paid Rts

30 Days up to Ex-Date

EGM and Allotment

Letters Posted

~ 21 Days

Company Announces





Nil Paid Rights

Record DateEx Date

Day 0 ~ Day 75

~ 5 Days before ex



1 Day 2 Days


Paid Rts


EGM and Allotment

Letters Posted

~ 21 Days

Company Announces





Nil Paid Rights

Record DateEx Date

Day 0 ~ Day 75

~ 5 Days before ex



1 Day 2 Days


Paid Rts


EGM and Allotment

Letters Posted

~ 21 Days

Company Announces





Nil Paid Rights

Record DateEx Date

Day 0 ~ Day 75

~ 5 Days before ex



1 Day 2 Days


Paid Rts


EGM and Allotment

Letters Posted

~ 21 Days

United Kingdom

Rights Issue


Similar Corporate Actions can be processed differently between markets, even within the same market, increasing risk

Period of Choice/Trade

~ 2 - 3 weeks

Company Announces

IssuePay DateAGM (Record Date)Ex Date

Day 0 ~ Day 150

1 Day

Ratio Calc. Period

~ 1 - 2 monthsUp to 2 months

BLIND ELECTIONChoice post x/d

NORMAL ELECTION

Per iod of Choice/ Tr ade 1 Day

Expiration Date

~ 2 weeks

End of Option Period

‘2nd Pay Date’

Per iod of Choice/ Tr ade

~ 2 - 3 weeks

Company Announces


Day 0 ~ Day 150

1 Day

Ratio Calc. Period



NORMAL ELECTION


Expiration Date

~ 2 weeks


‘2nd Pay Date’


~ 2 - 3 weeks

Company Announces


Day 0 ~ Day 150

1 Day

Ratio Calc. Period



NORMAL ELECTION


Expiration Date

~ 2 weeks


‘2nd Pay Date’


~ 2 - 3 weeks

Company Announces


Day 0 ~ Day 150

1 Day

Ratio Calc. Period



NORMAL ELECTION


Expiration Date

~ 2 weeks


‘2nd Pay Date’

• A Market that issues shares in ‘bearer’ form will issue entitlement ‘coupons’ (including Cash dividends) which can be tradable

• A Market that issues shares in ‘registered’ form will issue entitlements directly to the shareholder or where a shareholder choice is permitted a form/right will be issued

• Issuers within a Market may treat the same type of Corporate Action differently

• A Market that issues shares in ‘bearer’ form will issue entitlement ‘coupons’ (including Cash dividends) which can be tradable

• A Market that issues shares in ‘registered’ form will issue entitlements directly to the shareholder or where a shareholder choice is permitted a form/right will be issued

• Issuers within a Market may treat the same type of Corporate Action differently

Netherlands Stock Optional Dividend

(late 1990’s)


Too add to the complexity and timeframes of Corporate Actions most, if not all, of the Issuer communication is in paper

• A US Tender Offer requires a prospectus to be Issued and filed with the Regulator - Securities Exchange Commission (SEC)

• The Issuer provides only paper information

• DTC and Data Vendors ‘translate’ paper into electronic data

• Lack of STP from the Issuer introduces delay and potential error

• A US Tender Offer requires a prospectus to be Issued and filed with the Regulator - Securities Exchange Commission (SEC)

• The Issuer provides only paper information

• DTC and Data Vendors ‘translate’ paper into electronic data

• Lack of STP from the Issuer introduces delay and potential error

Issuer

Legal Counsel

SECFiling

EDGAR

Listing

_ Prospectus_ Proxy_ Tombstone_ Letter of transmittal

Stock Exchange

Investment Bank

Transfer / Tender Agent

Information Agent

DTC

Eligibility

DataVendors

DTC

Custodian or Broker Dealer

Custodian or Broker Dealer/

Beneficial Owner

PressRelease

KEY

Electronic Data(Propriority or ISO)

Primarily Paper (inc Forms)

Issuer

Legal Counsel

SECFiling

EDGAR

Listing


Stock Exchange

Investment Bank


Information Agent

DTC

Eligibility

DataVendors

DTC



Beneficial Owner

PressRelease

KEY



United States Tender

Announcement flow example


CSDs are well positioned to play a pivotal role in developing new processes to enhance STP and reduce Risk

• CSD8 (8th annual meeting of Central Securities Depositories)

• Corporate Action breakout sessions focused upon 3 areas:

• Risks in Corporate Actions Processing

• Automation and Standardization

• CSD Roles in Corporate Actions

• Attendees identified 3 main issues:

• Standard Format & Delivery (enable STP)

• Timely and Complete Announcements

• Centralized process for Corporate Action Announcements

• CSD8 (8th annual meeting of Central Securities Depositories)

• Corporate Action breakout sessions focused upon 3 areas:

• Risks in Corporate Actions Processing

• Automation and Standardization

• CSD Roles in Corporate Actions

• Attendees identified 3 main issues:

• Standard Format & Delivery (enable STP)

• Timely and Complete Announcements

• Centralized process for Corporate Action Announcements

Low

Medium

High

CentralizedProcess

Timely /Complete

Announc’nt

StandardFormat /Delivery

MultipleLanguages

TimelyPayments

Regulation

CompletePaymentDetails

Low Medium High

MARKET

ISSUER

Although asubjective view

this is a fairrepresentation of

the issuesdiscussed

Issue and importance level to be addressed by the

Issue and importance level to be addressed by the

See: www.csd8.org / Presentations / Breakout Session


DTCC developed a solution to address Global Corporate Action Announcements by creating a “golden copy”

• Volume: processed 900,000 global corporate action events in 2006

• Location: Offers round-the-clock support from offices in New York, London, Shanghai

• Sources: gathers information from 160 countries on about 1.6 million separate securities monitored by the validation service

• Accuracy: service offers “golden copy” data on corporate actions worldwide

• The GCA Validation Service is a global service that operates with a regional footprint

• Volume: processed 900,000 global corporate action events in 2006

• Location: Offers round-the-clock support from offices in New York, London, Shanghai

• Sources: gathers information from 160 countries on about 1.6 million separate securities monitored by the validation service

• Accuracy: service offers “golden copy” data on corporate actions worldwide

• The GCA Validation Service is a global service that operates with a regional footprint

ValidationValidation

EnrichmentEnrichment

PublicationPublication

Data CaptureData Capture

Service Management Governance


Customer Support Help Desk; Browser


Normalize Data

Normalize Data

GCA VS Service Model

Market Data

Feeds

Market Data

Feeds

Manual Data

Sources

Manual Data

Sources

CustomerCustomer

CustodianNetwork

CustodianNetwork

Information Providers

Clients

CustomerCustomer

CustomerCustomer

GCA VS Feed• Composite or “Single Right Answer”• Optional & confidential custodian checking• Data feed based on SOI or everything “blast”• Published every 4 hours

Market Data

Issue Resolution

SOI File

GCA VS Feed

Customer Support• 24 hour technical support help desk• 15 x 5 business support help desk• Global Account Team support• Onboarding and testing support

Market Data• Vendor data received on daily schedule• Global event coverage• Comprehensive event coverage across Equities

& Fixed Income

Online Browser• Secure real -time browser lookup• Allows access to all composite

data, and “owned” Custodian data

Service Management• Performance measured using set of

Business, Technical and Custodian SLA metrics on daily basis

• Advisory / Working Group governance

“Securities of Interest” File• Sent to GCA VS by

customer on daily basis• Daily “deltas” and optional

refresh, eg monthly









Normalize Data

Normalize Data


Market Data

Feeds

Market Data

Feeds

Manual Data

Sources

Manual Data

Sources

CustomerCustomer

CustodianNetwork

CustodianNetwork


Clients

CustomerCustomer

CustomerCustomer


Market Data

Issue Resolution

SOI File

GCA VS Feed



& Fixed Income








refresh, eg monthly

London• Service Delivery• Help Desk Support

• Hours of Operation• Monday to Friday • 8am - 6pm



New York• Service Delivery• Help Desk Support• IT Infrastructure• Vendor Management• Client & Service Mgt• Governance

• Hours of Operation• Monday to Friday• 8am - 6pm



Shanghai• Service Delivery• Help Desk Support




Language Coverage• English, Spanish,

Portuguese, German, Italian, French, Mandarin, Cantonese, Korean, Japanese, Indonesian, Malaysian, Arabic, Turkish, Bengali and Russian.



Operational Overview

• Since the service went "live" in April 2003, it has created, on behalf of its customers, over 3M unique corporate action events from 160 countries / provinces. On average, the service creates and publishes over 17,000 new corporate events per week.

• In addition, the 'Custodian checking' optional service reconciles approximately 3,000 ISO15022 records, from 111 Custodians, per week.




Global Footprint


DTCC GCA VS clients require near real time notification of Corporate Actions delivered in a standardized manner

• Corporate Action announcements received from multiple sources are ‘standardized’

• Key Data Elements are completed

• Announcements are separated into Event, Option and Payout details

• Detailed Text added (where needed) to provide complete coverage of the event

• Corporate Action announcements received from multiple sources are ‘standardized’

• Key Data Elements are completed

• Announcements are separated into Event, Option and Payout details

• Detailed Text added (where needed) to provide complete coverage of the event


DTCC GCA VS provides additional information to provide a complete view of the Corporate Action

• Statuses Track Accuracy, Timeliness and Completeness of Data

• Statuses Track Accuracy, Timeliness and Completeness of Data

• Reference to Associated Event for the Same Security

• Links to Multi-market for the Same Event

• Reference to Associated Event for the Same Security

• Links to Multi-market for the Same Event


A Global effort is needed to manage risk and improve efficiency through effective standardized communication and processing

• Market Practice Groups created by SWIFT to establish usage rules for ISO 15022

• The Securities Market Practice Group coordinates global input for ISO / SWIFT Maintenance Group

• SMPG Corporate Action documentation includes:

• Global Document for MT564-8

• Guidelines for ~20 Countries

• Market Practice Groups created by SWIFT to establish usage rules for ISO 15022

• The Securities Market Practice Group coordinates global input for ISO / SWIFT Maintenance Group

• SMPG Corporate Action documentation includes:

• Global Document for MT564-8

• Guidelines for ~20 Countries

• The European Union is undergoing a ‘harmonization’ effort to standardize processing of the securities industry

• The ‘Giovannini Group’ identified a number of barriers to standardization including Corporate Actions (Barrier 3)

• SWIFT Standards leading part of this initiative (Barrier 1) based upon ISO 15022 and ISO 20022 messaging

• The European Union is undergoing a ‘harmonization’ effort to standardize processing of the securities industry

• The ‘Giovannini Group’ identified a number of barriers to standardization including Corporate Actions (Barrier 3)

• SWIFT Standards leading part of this initiative (Barrier 1) based upon ISO 15022 and ISO 20022 messaging

• The need to bring the Issuers closer to the Investor Community is recognized globally

• Similarly to DTCC, Euroclear is investing in new systems to harmonize processing within the its markets

• To maximize investment return Euroclear have proposed using ISO20022 to model the communication between the Issuer and CSD

• The need to bring the Issuers closer to the Investor Community is recognized globally

• Similarly to DTCC, Euroclear is investing in new systems to harmonize processing within the its markets

• To maximize investment return Euroclear have proposed using ISO20022 to model the communication between the Issuer and CSD


ACSDA is well positioned to support and even lead the development of Standards within ACSDA countries

• ACSDA formed Corporate Action Working Group to address common issues

• Business Case:

• Global Initiatives for Corporate Actions require input from ACSDA Countries

• Attract Investment into local economies with greater Corporate Action disclosure

• Organization:

• 3 Regional Chairs: South America, Central America and North America, South Africa and the Caribbean

• Initial Objective:

• Map the Corporate Actions landscape within the individual ACSDA countries to provide a foundation for information exchange

• At the ACSDA 8th AGM (March 2006, El Salvador) agreed to focus upon:

• Promotion of Best Practices & ISO 15022 usage

• Publishing announcements same day

• Working with Issuers/Agents for Investor benefit

• Processing of all Corporate Actions in the Market

• ACSDA formed Corporate Action Working Group to address common issues

• Business Case:

• Global Initiatives for Corporate Actions require input from ACSDA Countries

• Attract Investment into local economies with greater Corporate Action disclosure

• Organization:

• 3 Regional Chairs: South America, Central America and North America, South Africa and the Caribbean

• Initial Objective:

• Map the Corporate Actions landscape within the individual ACSDA countries to provide a foundation for information exchange

• At the ACSDA 8th AGM (March 2006, El Salvador) agreed to focus upon:

• Promotion of Best Practices & ISO 15022 usage

• Publishing announcements same day

• Working with Issuers/Agents for Investor benefit

• Processing of all Corporate Actions in the Market


While mapping the Corporate Action landscape, we asked the ACSDA members to identify the key issues faced today

Type of Issues faced by ACSDA members (17 CSDs responded)

7

2

2

2

1

1

1

11

0 2 4 6 8 10 12

Deadline

Communication

Standardization

Calculation

Manual Process

Different rule

International bonus

Ownership Tranfer

Number of CSDs

Type of Issues faced by ACSDA members (17 CSDs responded)

7

2

2

2

1

1

1

11

0 2 4 6 8 10 12

Deadline

Communication

Standardization

Calculation

Manual Process

Different rule

International bonus

Ownership Tranfer

Number of CSDs

Deadlines and Communication cited most frequently


ACSDA members were asked about existing rules which may or may not reduce risk – should markets have specific rules?

Rule ExistsNo rule Rule ExistsNo rule Rule ExistsNo rule Rule ExistsNo rule Rule ExistsNo rule Rule ExistsNo ruleRule Exists

No rule

0

1

2

3

4

5

6

7

8

Number of CSDs

Cashdividends

Stockdividends

Splits Redemption InterestPayment

Rights issues Proxies

Rules for Record Dates applicable in market (17 CSDs responded)

Rule Exists No rule

Rule ExistsNo rule Rule ExistsNo rule Rule ExistsNo rule Rule ExistsNo rule Rule ExistsNo rule Rule ExistsNo ruleRule Exists

No rule

0

1

2

3

4

5

6

7

8

Number of CSDs

Cashdividends

Stockdividends

Splits Redemption InterestPayment

Rights issues Proxies

Rules for Record Dates applicable in market (17 CSDs responded)

Rule Exists No rule

Roughly a 50/50 split where Record Date rules are applied


What can you do to help?

• Support local initiatives that address efficiency and risk management

• Drive ACSDA to be the key organization in National Market Practice Groups

• Work together to provide timely and accurate Corporate Action Information

• The Global Securities Industry requires support from ALL markets

• Support local initiatives that address efficiency and risk management

• Drive ACSDA to be the key organization in National Market Practice Groups

• Work together to provide timely and accurate Corporate Action Information

• The Global Securities Industry requires support from ALL markets


Appendix – UK Rights Issue (for slide 5)

Company Announces





Nil Paid Rights

Record DateEx Date

Day 0 ~ Day 75

~ 5 Days before ex



1 Day 2 Days


Paid Rts


EGM and Allotment

Letters Posted

~ 21 Days

Company Announces





Nil Paid Rights

Record DateEx Date

Day 0 ~ Day 75

~ 5 Days before ex



1 Day 2 Days


Paid Rts


EGM and Allotment

Letters Posted

~ 21 Days

Company Announces





Nil Paid Rights

Record DateEx Date

Day 0 ~ Day 75

~ 5 Days before ex



1 Day 2 Days


Paid Rts


EGM and Allotment

Letters Posted

~ 21 Days

Company Announces





Nil Paid Rights

Record DateEx Date

Day 0 ~ Day 75

~ 5 Days before ex



1 Day 2 Days


Paid Rts


EGM and Allotment

Letters Posted

~ 21 Days


Appendix – Netherlands Stock Optional Dividend (for slide 6)


~ 2 - 3 weeks

Company Announces


Day 0 ~ Day 150

1 Day

Ratio Calc. Period



NORMAL ELECTION


Expiration Date

~ 2 weeks


‘2nd Pay Date’


~ 2 - 3 weeks

Company Announces


Day 0 ~ Day 150

1 Day

Ratio Calc. Period



NORMAL ELECTION


Expiration Date

~ 2 weeks


‘2nd Pay Date’


~ 2 - 3 weeks

Company Announces


Day 0 ~ Day 150

1 Day

Ratio Calc. Period



NORMAL ELECTION


Expiration Date

~ 2 weeks


‘2nd Pay Date’


~ 2 - 3 weeks

Company Announces


Day 0 ~ Day 150

1 Day

Ratio Calc. Period



NORMAL ELECTION


Expiration Date

~ 2 weeks


‘2nd Pay Date’


Appendix – US Tender Offer Announcement Flow (for slide 7)

Issuer

Legal Counsel

SECFiling

EDGAR

Listing


Stock Exchange

Investment Bank


Information Agent

DTC

Eligibility

DataVendors

DTC



Beneficial Owner

PressRelease

KEY



Issuer

Legal Counsel

SECFiling

EDGAR

Listing


Stock Exchange

Investment Bank


Information Agent

DTC

Eligibility

DataVendors

DTC



Beneficial Owner

PressRelease

KEY




Appendix – GCA VS Overview (for slide 9)









Normalize Data

Normalize Data


Market Data

Feeds

Market Data

Feeds

Manual Data

Sources

Manual Data

Sources

CustomerCustomer

CustodianNetwork

CustodianNetwork


Clients

CustomerCustomer

CustomerCustomer


Market Data

Issue Resolution

SOI File

GCA VS Feed



& Fixed Income








refresh, eg monthly









Normalize Data

Normalize Data


Market Data

Feeds

Market Data

Feeds

Manual Data

Sources

Manual Data

Sources

CustomerCustomer

CustodianNetwork

CustodianNetwork


Clients

CustomerCustomer

CustomerCustomer


Market Data

Issue Resolution

SOI File

GCA VS Feed



& Fixed Income








refresh, eg monthly


Appendix – GCA VS Overview (for slide 9)























Global Footprint


Appendix – Standards Organization Overview (for slide 11)

The Standard Bodies

The Market Representatives

US

American National Standards Institute

Global

International Standards Organization

TC68 Secretariat

TC68 Technical CommitteeBanking and Related Services

Registration ManagementChair: Euroclear

ISITC

National Market Practice Group

ISO Standards (secretary SWIFT)

SWIFT Maintenance Group SWIFT National Group

SW

IFT

Ha

rmo

niz

ati

on

Grp

Accredited Standards Committee X9Financial Industry Standards

US Technical Advisory Group

TC68 Registration Management Group

SC4 – Securities

Securities Standards Evaluation Group

ISO15022 ISO20022

ISO15022

ISO20022

X9D – Securities Processing

X9D – Securities Processing

Re

gis

tra

tio

n A

uth

ori

tyS

WIF

T

Registration ManagementChair: US - ASC X9

Global Market Practice Group

global corporate actions acsda leadership forum october 9 th 2007

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