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ACSDA General Assembly Panel 2 – Asset Services Dan Thieke Brett Lancaster Friday 25 March, 2011 v03.

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Presentation on theme: "ACSDA General Assembly Panel 2 – Asset Services Dan Thieke Brett Lancaster Friday 25 March, 2011 v03."— Presentation transcript:

1 ACSDA General Assembly Panel 2 – Asset Services Dan Thieke Brett Lancaster Friday 25 March, 2011 v03

2 Brett Lancaster Managing Director – Americas Securities Dan Thieke Vice President – Asset Services

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

4 Issuers fulfill their obligation by sending out a document, written in free text, causing issues Agree on event types? Agree on event types? Agree on data elements? Agree on data elements? Agree on source dissemination? Agree on source dissemination? Agree on a unique ID? Agree on a unique ID? Prospectus Press releases Press releases Letters of transmittal Letters of transmittal Regulatory filings Regulatory filings

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

6 With the recent financial crisis, clients tell us that the operational risks need to be managed Interpretation Risk Interpretation Risk 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 Timing Risk Timing Risk Need for manual intervention results in delays in communicating information to the end investor Accuracy Risk Accuracy Risk 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 Significant Costs Significant Costs The lack of straight-through processing throughout the corporate actions chain results in additional cost and liability being absorbed by the financial services industry Risks

7 However, the planets have aligned to allow us to finally sort out the problem … at least for the U.S. Whats it all mean? Savings … Financial Crisis DTCC CA Re-engineering ISO XBRL Maturity Maybe, just maybe …

8 DTCC is working with SWIFT to implement ISO standards for Corporate Actions DTCC is the worlds 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 –Supports the entire lifecycle - all event types, all asset classes –Mandatory cutover from proprietary formats by 2015

9 DTCC Corporate Actions Re-engineering features were defined by the industry, for the industry Single Event Record Single Event Record Unique CA Identifier Unique CA Identifier Delivery Over SMART or SWIFT Delivery Over SMART or SWIFT Near Real-Time Events Near Real-Time Events Automated Elections & Payments Automated Elections & Payments Supports U.S. and Global Events Supports U.S. and Global Events GUI Integrated Across CA Lifecycle GUI Integrated Across CA Lifecycle CA Re-engineering Features

10 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

11 300 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

12 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 & 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 files will be retired Oct 09 Apr 11 Q or sooner

13 The initial announcements pilot starts Apr 23 with BBH. Separately, Citi are already piloting XBRL Pilot Clients

14 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 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 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 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

15 The industry has quantified the expected gains in operational efficiency - the benefits are tangible Whats it all mean? Savings … Overall savings Sell-Side savings Buy-Side savings Improvement in STP rate $230M $400M $170M 50% 80% 50% 80% Other Asian XBRL projects report actual error rates falling by x100 fold Quantitative Benefits

16 Toronto Sep 2011


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