introduction and background
DESCRIPTION
International Securities Market Advisory Group (ISMAG) Standardising the Processing of International Securities. 1. Introduction and Background. 2. Recommendations. 3. Conclusion. Corporate Actions Pre-advising events , e.g. puts, calls, conversions, warrant exercises - PowerPoint PPT PresentationTRANSCRIPT
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International Securities Market Advisory Group (ISMAG)
Standardising the Processing of International Securities
1.
2.
3.
Introduction and Background
Recommendations
Conclusion
2
1. IntroductionAsset Servicing through ICSDs - Summary
Corporate Actions• Pre-advising events, e.g. puts, calls,
conversions, warrant exercises• Need to advise applicable dates
(payments), deadlines (for instructions)• Sending concise event notifications to
customers, also making full (applicable) documentation available
• Ensure cash or security proceeds received and credited to holders without delay
• Provide updates for any adjourned meetings and voting requirements, etc.
Income Processing• Record and notify security holders of
forthcoming income events• Need to pre-advise applicable dates (record,
payment, fixing and/or determination)• Need to pre-advise accurate income
entitlements, limiting reversals/amendments• Processing payments by confirming cash
amounts processed the day prior to value-date, enabling same-day use of funds
Pro-active value added services
The ICSDs have to receive timely and accurate information for onwards STP delivery to their clients
(for onwards delivery to their underlying clients)
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1. IntroductionCurrent inefficiencies & risks in Information flows
* * Each party : • to receive the information,• to understand/interprete it • to store it creating its own golden copy
-> lack of a unique golden source & copy (various golden copies e.g. payment dates, ..)-> lack of Information « push » from Issuer and its agent (current « pull/chasing » from downstream parties) -> lack of STP from upstream parties (starts with ICSDs providers)
Issuer
Issuer’s Agent
ICSDCDPPA
Investors
Data Vendors
Access to each ICSD security and event database
No STP
No STPNo STP
No STP
Issuer = Golden soure & copy
IssuerIssuer
Issuer’s Agent
Issuer’s Agent
ICSDICSDCDCDPPAPPA
Data Vendors
Data Vendors
Access to each ICSD security and event database
No STP
No STPNo STP
No STP
** ** **
**
STPSTP
ISMAG objective: to address current high inefficiencies, costs and risks related toInternational Securities Asset servicing (New Issues, Corporate Action & Income) information coverage, timeliness and quality
**
No STP No STP
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G.E.EIB
JP MorganBarclays
Goldman SachsUBS
Crédit SuisseRabobank
CommerzbankRoyal Bank of Scotland
BNP & SG
Citibank N.A.Deutsche Bank
BNYMHSBCBP2S
Société GeneraleBAML
ICMSAICMA as observer
AGC & Northern TrustISSA
1. IntroductionISMAG Organisation : End-to-end from Issuers to Investors
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2007 2008 2009 2010
Define benchmarks & guidelines of best practices = MPB Feb 2011
Monitor adherence to MPB benchmarks : KPIs• NI closing +1 BD (IPA/LM)• Income rate fixing (Calculation Agent)• Reversals volumes + timeliness (Offender)+ TBD CA e.g. fixing on Cash/Shares redemption (Calculation Agent)
§ Market framework definition and implementation: Letter of representation (LoRs), ISMAG label, reporting toissuers/agents
§ Increase STP by converging Information checklists to ISO
standards
Raise market awareness on MPB to foster implementation
PILLAR 2
2011 +
PILLAR
1
IMPLEMENTATION
1. IntroductionStatus & Next steps
PILLAR
3
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2. ISMAG Recommendations in line with ISSA principles
defined with & for upstream parties, i.e. Issuers, their Legal counsels and their Agents
to address inefficiencies and risks linked to information provision processes
Information coverage (completeness & accuracy) Information timeliness Information processing
adherence to and usage of the best practices will ensure an efficient and effective service to investors through end-to -end processing chain
Operational Market Practice Book (MPB)- February 2011
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ISMAG taxonomy : information checklists and specific recommendations to achieve completeness and common understanding
End-to-End Roles & Responsibilities at issuance and during securities lifecycle
who needs to do what to whom by when by when - specific information benchmarks
E.g. variable rate notification - no later than Fixing / Determination Date + 1 Business Day from Calculation Agent to Paying Agent
Processing best practices
E.g. Paperless corporate action processing – electronic instead of paper instructions E.g. Root cause of income amendments (who, why, what)
2. ISMAG Recommendations – MPB 2011 “Bottom-up” approach
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-> Calculation Agents’ performance– Ref. benchmarks:
2. ISMAG RecommendationsImplementation monitoring e.g. rate fixing timeliness
Fixing/ Determination date + 1 BD
Sources: IPA data from BP2S, BNYM, CITI, Deutsche Bank
Calculation Agents to work differently: from Payment Date to Fixing/Determination Date
Income rate fixing timeliness
77% 74%
90% 85% 90% 86% 88% 89% 88% 84%
02,0004,0006,0008,000
10,00012,00014,00016,00018,000
Jun-09 Aug-09 Oct-10 Dec-10 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10
#of
fixi
ng
s
0%
20%
40%
60%
80%
100%
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Proposed ICSDs framework aims to:
achieve increased transparency
3. Conclusion: Market Framework
To foster best practices implementation by the Market
Issuer Investors
Market Frameworkto increase
transparencyon securities portfolio
& expected service level :
ISMAG Adherent or ISMAG exempt ?
on securities service level :
ISMAG compliant or not ?
optimise end-to-end operational efficiencies and reduce risks : from a downstream parties pull model to an upstream parties push model
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3. Conclusion : Market FrameworkLetter of Representation : engagement to implement MPB standards
ICS
D’s
Issuers
Issuer Agent / Trustee
(Representative)
Various Agents
Market P
ractice Book
Agents’ M
onitoring via KP
I’s
Issuer/Agents agreements
CD / CSP
Service quality to Investors highly dependent from various Issuer's Agents performance
Market framework (starts on a voluntary basis) :
1. Issuer LoR (and exemption possibilities for rate fixing timeliness)
2. Issuers’ Agents LoR
Issuer LoR
Issuer’s Agent LoR
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3. ConclusionISMAG = end-to-end benefits
… for Investors Improved service levels in asset servicing / Corporate Actions / Income events
i.e. timeliness, completeness and accuracy of information & processing
Increased transparency on their assets performance/structure (e.g. New Reversal Communication)
… for Issuers Increased Investors’ satisfaction
Attractive and competitive issuance model to expand Investor base
Better servicing and increased efficiency, leading to reduced costs and risks
… for Intermediaries Improved service level towards Investors and Issuers,
Attractive issuance model to expand Investor base
Better cost control in a volume increasing and complex environment
Better risk controls through increased efficiency and standardisation
Increased communication amongst various Market players
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Additional Information?
www.euroclear.com/ISMAG
www.clearstream.com/ISMAG