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Corporate Action Reengineering BDUG Conference October 18 th 2006 Corporate Action Reengineering BDUG Conference October 18 th 2006.

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Presentation on theme: "Corporate Action Reengineering BDUG Conference October 18 th 2006 Corporate Action Reengineering BDUG Conference October 18 th 2006."— Presentation transcript:

1 Corporate Action Reengineering BDUG Conference October 18 th 2006 Corporate Action Reengineering BDUG Conference October 18 th 2006

2 2 Security Master Files Shared Interfaces Corporate Actions Underwriting * NIIDS SOURCE: Securities Origination Underwriting Reliable Corporate action Environment A unified end-to-end platform from issuance through the entire asset servicing life cycle: Underwriting – Corporate Actions – integrated with Master files and other Core Depository functions

3 3 Reengineering Objectives Provide more accurate and timely servicing information Replace legacy sub-systems with newly architected platform Automate and streamline redundant processes and data storage Increase flexibility with rules-based system Enhance functionality: ISO15022, multi-currency Reduce ongoing technology support costs Consistency of processing – Common field definitions and business rules Revamp New Issue Information Dissemination Provide more accurate and timely servicing information Replace legacy sub-systems with newly architected platform Automate and streamline redundant processes and data storage Increase flexibility with rules-based system Enhance functionality: ISO15022, multi-currency Reduce ongoing technology support costs Consistency of processing – Common field definitions and business rules Revamp New Issue Information Dissemination

4 4 New Issue Information Dissemination Syndicate Desk – Communicate to members of the underwriting syndicate – Automated/Manual Syndicate Desk – Communicate to the street (Vendors/non syndicate members) – Manual Trading of New Issue Middle Office (Trade support) – Procurement/Receipt and Set up of New Security Master Data - Manual at firm or vendor DTC Eligibility, Closing and Distribution Syndicate Operations – Communication to DTC and other industry utilities - Manual New Issue Information Dissemination Syndicate Desk – Communicate to members of the underwriting syndicate – Automated/Manual Syndicate Desk – Communicate to the street (Vendors/non syndicate members) – Manual Trading of New Issue Middle Office (Trade support) – Procurement/Receipt and Set up of New Security Master Data - Manual at firm or vendor DTC Eligibility, Closing and Distribution Syndicate Operations – Communication to DTC and other industry utilities - Manual Current State of New Issue Processing

5 5 Future State of New Issue Processing New Issue Information Dissemination – How will DTCC automate? DTCC is linking with major book building/running services (Bondesk Syndicate, Dealogic, i-Deal, Marketpipe, NAPA, Bloomberg Deal, ZIA) DTCC has flexibility to link with underwriters proprietary book building/running, trade processing, security master system(s) or service bureau DTCC is linking to information service providers, service bureaus, participants, and regulators Trading of New Issue – How will DTC automate? DTC will provide for real time distribution of new issue information required for security master set up for DTC Participants and Bank Custodians. DTC Eligibility, Closing and Distribution – How will DTC automate? Syndicate Operations – DTC will store new issue information for the purposes of eligibility closing and distribution

6 6 Future State Benefits New Issue Information Dissemination Avoids re-keying – STP from bookbuilding/running systems Automated regulatory compliance of MSRB rule G34 and NASD rule 6260 Automated dissemination to vendors in real time – Bloomberg, Interactive, S&P, ect Facilitates faster processing of secondary market trades - Automated receipt of security data in real time Facilitates compliance of new SEC access = delivery rules for prospectus delivery Avoids re-keying – STP from bookbuilding/running systems Automated regulatory compliance of MSRB rule G34 and NASD rule 6260 Automated dissemination to vendors in real time – Bloomberg, Interactive, S&P, ect Facilitates faster processing of secondary market trades - Automated receipt of security data in real time Facilitates compliance of new SEC access = delivery rules for prospectus delivery

7 7 Completed Proof of Concept Q Commence UAT Q Commence testing with vendors and pilot firms – Q Begin transition Q Go live - August 2007 NUWS / NIIDS Project Milestones

8 8 Corporate Action Processing and Announcements

9 9 Complete analysis and functional design Q Release file layouts to industry Q Complete development Q Initiate UAT Q Commence transition Q Complete analysis and functional design Q Release file layouts to industry Q Complete development Q Initiate UAT Q Commence transition Q Project Milestones

10 10 Aggressive outreach program includes Participants Vendor/service bureaus Agents Guidance Council Communications approach Focus sessions Website (host webcams, FAQs, and presentations) eLetter News releases Aggressive outreach program includes Participants Vendor/service bureaus Agents Guidance Council Communications approach Focus sessions Website (host webcams, FAQs, and presentations) eLetter News releases Industry Outreach - Communication

11 11 Current focus on data migration Parallel testing Execute migration procedures User access Testing of all functionality Phased approach MMI Distributions and Redemptions Mandatory events Voluntary events and Mandatory with Option events Current focus on data migration Parallel testing Execute migration procedures User access Testing of all functionality Phased approach MMI Distributions and Redemptions Mandatory events Voluntary events and Mandatory with Option events System Implementation (Transition and Migration)

12 12 Risk mitigation is key decision driver Process Architectural proof of concept Test concepts Test code compliance with industry standards Use of best practices Security analysis (code vulnerability) Iterative Risk mitigation is key decision driver Process Architectural proof of concept Test concepts Test code compliance with industry standards Use of best practices Security analysis (code vulnerability) Iterative System Implementation (Transition and Migration)

13 13 System Implementation (Transition and Migration) Testing Game Plan Final UAT - 9 months Scripted - 4 months Parallel - 5 months Execute “talkback” process between production and parallel e.g. instructions Transition to begin post successful parallel Testing Game Plan Final UAT - 9 months Scripted - 4 months Parallel - 5 months Execute “talkback” process between production and parallel e.g. instructions Transition to begin post successful parallel

14 14 DTCC has partnered with a vendor for Underwriting as test case Learning Approach Context sensitive help E Learning Instructor lead training Job aids User manual Service guide DTCC has partnered with a vendor for Underwriting as test case Learning Approach Context sensitive help E Learning Instructor lead training Job aids User manual Service guide Training

15 15 Corporate Action Announcements 2007 Strategic Plans Service Offering Fees based on existing fee schedule No additional charge for the universe Implementation of more comprehensive service standards on DTC-eligible announcements Remove dependency on selected vendors by strengthening DTCC’s ‘manufacturing’ capability Introduce future rationalized events, fields and statuses as part of the re-engineering of the existing announcement files Service Offering Fees based on existing fee schedule No additional charge for the universe Implementation of more comprehensive service standards on DTC-eligible announcements Remove dependency on selected vendors by strengthening DTCC’s ‘manufacturing’ capability Introduce future rationalized events, fields and statuses as part of the re-engineering of the existing announcement files

16 Impact on Service Bureaus Service Bureaus will receive universe file from DTCC Service Bureau will be required to submit to DTCC a list of all non-Participants they represent and respective SOI’s Service Bureau will be charged on behalf of all non- Participant clients Service Bureau must execute a legal contract defining use of the data Service Bureaus will receive universe file from DTCC Service Bureau will be required to submit to DTCC a list of all non-Participants they represent and respective SOI’s Service Bureau will be charged on behalf of all non- Participant clients Service Bureau must execute a legal contract defining use of the data

17 17 Guiding Principles for the New DTCC Corporate Action Announcement: Event Content (A reminder) Single event ID for the life of the announcement Currently, announcement IDs are based upon CUSIP/Activity Code Elimination of DTC function codes Simplify the Event Types and remove ‘processing’ references Provide more information on Options and Payouts Remove Contra CUSIPs Option tracking done by RRG Account Single event ID for the life of the announcement Currently, announcement IDs are based upon CUSIP/Activity Code Elimination of DTC function codes Simplify the Event Types and remove ‘processing’ references Provide more information on Options and Payouts Remove Contra CUSIPs Option tracking done by RRG Account

18 18 Guiding Principles for the New DTCC Corporate Action Announcement: File Concepts Publish Information in 2 formats ISO15022 XML *Currently DTC publishes in propriety formats Publish ALL Events in a single file * Currently DTC announces within 3 main files: REORG, REDEM and DIVANN Publish Information in 2 formats ISO15022 XML *Currently DTC publishes in propriety formats Publish ALL Events in a single file * Currently DTC announces within 3 main files: REORG, REDEM and DIVANN

19 19 Guiding Principles for the New DTCC Corporate Action Announcement: File Concepts Publish Event Details in a single message General event information Option details Payout details * Currently DTC provides separate messages per event option Intra-day delivery option for all announcements * Currently end of day batch processing Publish Event Details in a single message General event information Option details Payout details * Currently DTC provides separate messages per event option Intra-day delivery option for all announcements * Currently end of day batch processing

20 20 The ISO15022 MT564 (notification) will be primary format and supplemented, as needed, with the MT568 Receipt and Delivery of XML will take a similar path but without defined XML standards for Corporate Actions, DTC will take a lead with our own format.

21 21 ISO15022 Format: Data mapped where possible, otherwise information will be published within the ‘Text’ Blocks The additional data will be provided in the Text blocks within MT564 Sequences D, E and F; mapped to the most appropriate Sequence For example: ‘Chill’ On/Off Days will be found in Sequence D under the qualifier INCO (information Conditions) Tax information will be found in Sequence D under the qualifier TAXE (Taxation Conditions) Fractional Share Information on payouts will be found in Sequence E under the qualifier TXNR (Narrative Version) Additional information will flow onto the MT568 when the MT564 10k byte limit is reached The additional data will be provided in the Text blocks within MT564 Sequences D, E and F; mapped to the most appropriate Sequence For example: ‘Chill’ On/Off Days will be found in Sequence D under the qualifier INCO (information Conditions) Tax information will be found in Sequence D under the qualifier TAXE (Taxation Conditions) Fractional Share Information on payouts will be found in Sequence E under the qualifier TXNR (Narrative Version) Additional information will flow onto the MT568 when the MT564 10k byte limit is reached

22 22 ISO15022 Format: Data mapped where possible, otherwise information will be published within the ‘Text’ Blocks. ISO15022 ‘text’ blocks accommodate 10 lines of 35 bytes (10*35x) but can be expanded by using tag 70e qualifiers, of which certain qualifiers are repeatable Additional data presented with the same name as XML version, for example: ‘Hearing Date’ will be shown as or ‘Chill Release Day for Deposit’ will be shown as A single line will consist of only 1 data element name/value, for example: :70E::ADTX// Where the data name and the value exceed 35 characters the data will flow into the second line, for example: (Line 1) :70E::INCO// ISO15022 ‘text’ blocks accommodate 10 lines of 35 bytes (10*35x) but can be expanded by using tag 70e qualifiers, of which certain qualifiers are repeatable Additional data presented with the same name as XML version, for example: ‘Hearing Date’ will be shown as or ‘Chill Release Day for Deposit’ will be shown as A single line will consist of only 1 data element name/value, for example: :70E::ADTX// Where the data name and the value exceed 35 characters the data will flow into the second line, for example: (Line 1) :70E::INCO//

23 23 A side by side example of a Cash Dividend in XML and ISO15022 Event Type Record Date Rate XML VersionISO15022 Version Non ISO Field Placed in Tag 70E ‘ General Details’ (Seq. D) Option

24 24 Unsupported Files in ISO Format published in XML Function NameFile DescriptionOutbound CSHDALMMI Cash Settlement Dividend Allocation FileY CSHDPJMMI Cash Settlement Dividend Projection FileY CSHDUNMMI Cash Settlement Dividend Unallocated FileY CSHEUDCash Settlement End of Day Unallocated Funds FileY CSHPRJCash Settlement Projection FileY CSHRALMMI Cash Settlement Reorg Allocation FileY CSHRPJMMI Cash Settlement Reorg Projection FileY CSHRUNMMI Cash Settlement Reorg Unallocated FileY CSHSETEnd of Day Cash SettlementY CSHSTA thru GHourly Slice of Cash Settlement ActivityY CSHSTLDividend/Reorg Cash Settlement InformationY CSHUNLCash Settlement Unallocated Funds FileY RDMENTReorg Deposit Mandatory EntitlementsY STKPNDNext Day Projected Stock Loan ash Settlement InformationY

25 25 Questions?


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