The DTCC, SWIFT and XBRL US are making a joint effort to turn the handling of corporate actions throughout Wall Street into an automated, straight-through process. They have announced a plan to use XBRL more heavily in the communicating of corporate actions, to create a shared taxonomy or classification scheme and to use existing message formats such as ISO 20022, so that corporate actions information can be easily and automatically shared among the organizations and their members. According to the DTCC, with these changes in place the misinterpretations and exceptions that occur due to manual intervention and re-keying will be significantly lessened and STP and efficiency will be brought to the marketplace.
Approximately 200,000 corporate actions such as dividends, bond redemptions, rights offerings and mergers are announced each year by publicly traded companies and other issuers or offerors in the U.S. alone.'Many require multiple documents to be issued over a period of time, and because the processing of these announcements is mostly handled manually, these practices remain beset by error-prone, time-consuming inefficiencies, thus creating the potential for heavy losses and significant negative impact on investors in these securities and the financial community.''
A 2006 study by the U.K. independent research firm Oxera found losses on corporate actions worldwide were between $400 and $900 million U.S. dollars each year. Industry sources (Financial Services Research 2006) suggest that upwards of 10% of financial intermediaries' operational budgets are held against corporate actions claims by investors for losses.'
The plan developed by DTCC, SWIFT and XBRL US includes the following steps:
— The three organizations will work together to build a corporate actions taxonomy aligned with ISO 20022 repository elements. This new taxonomy will support a transition from issuer-generated documentation to XBRL-formatted (and therefore machine-readable) data.'This will enable issuers to electronically capture and identify key data such as the terms of a reorganization when preparing documents for a corporate action.
— DTCC will create a unique ID to be associated with each corporate action announcement upon its creation, thus facilitating the identification of an event between all parties and reducing ambiguity in the announcement process.
— The data tags and elements will be aligned with ISO 20022, permitting XBRL-tagged data to be readily converted into ISO 20022 messages.''
— SWIFT will roll out the new ISO 20022 corporate actions messages on a global basis, which builds on the efficiencies gained through ISO 15022 adoption.
— DTCC will make all corporate action announcements it publishes available in the ISO 20022 format beginning in 2010. All existing legacy publication files will ultimately be decommissioned, expected to occur by 2015.