Pushing for Change

The need to achieve corporate actions standardization at the issuer level has long been on the agenda. Involving all parties involved in the processing lifecycle of a corporate action remains an ongoing effort. The question now is whether exchanges can do more to help engage issuers.

Exchanges are typically seen as passive when it comes to corporate actions standardization. Yet, change may be on its way. Last year, SIX Swiss Exchange released Connexor, a platform that facilitates data capture and electronic distribution. The platform acts as a link between all parties involved in the value chain of a financial instrument, including the issuers, data vendors and investors. From a corporate actions perspective, this means that companies listed on the exchange will submit corporate actions data electronically.

Zurich-based Nourredine Yous, head of data quality and development at SIX Telekurs, says the main driver for the launch of this platform was to increase straight-through processing and improve data quality to ensure information is received direct from the originator. "A bank issuing a structured product or a company paying a dividend would input the messages themselves into the platform. All users will get the same message from the originator of the information," he says.

SIX partly implemented Connexor Events, the corporate actions part of the product, in November 2009. A subset of the message types has already been released, and the complete list of message types will be released in June 2010.

The Swiss initiative is one example of how exchanges can play a role in standardizing corporate actions data by implementing systems that facilitate automation. London-based Paul Phillips, director of business development at SmartStream Technologies, says: "The only sources that can put pressure (on issuers) are the exchanges and the regulators."

Right now, it may be more realistic to expect exchanges to take action. Phillips says regulators have more urgent matters to tackle at the moment, but the exchanges could do more when it comes to corporate actions standardization.

The exchanges have also been roped in to discuss XBRL for corporate actions. Data tagging standard XBRL is already used by many exchanges for financial reporting, and the idea is that the scope of existing projects can easily be expanded to include corporate actions.

Washington, DC-based Max Mansur, product and market manager, securities industry at Swift, says there have been conversations with several exchanges on the value that XBRL would bring to the corporate actions space in terms of effectiveness. "Some of the exchanges are looking at XBRL as an enabler to provide reference data," he says, adding that many exchanges provide corporate actions reference data directly to the market, and XBRL would help them ensure they provide high-quality data, verified and validated with their members.

The question now is if more exchanges will take the same approach as the Swiss - the approach that is set to improve quality of corporate actions data, reduce manual intervention and mitigate risk. And all this without regulatory involvement.

Q&A

The Shenzhen Approach

IRD talks to Christy Lee, manager of the information service department at Shenzhen Securities Information, Shenzhen Stock Exchange about efforts to standardize corporate actions data.

- Do you think exchanges are doing enough to push for corporate actions standardization?

Obviously, it is highly necessary for exchanges to push for corporate actions standardization. And there is still room for exchanges to do some work. In our case, currently the ISO15022 format corporate actions data has not fully completed straight-through processing and still has manual intervention. The main reasons include the fact that listed companies are not required to disclose the corporate actions data in English, which requires a translation before publishing to the overseas world. Listed companies are not required to disclose the corporate actions data in structured data format either, but do so instead in common PDF or TXT format. Therefore, we have to change this common format data into ISO15022 standard format data.

The exchange has had a good experience with XBRL in periodic reports, and (there is) a possibility to use this for corporate actions as well. We plan to have corporate actions data on all the listed instruments fully submitted or disclosed in XBRL or another standard format in the future, which is a further important step towards STP. It will certainly provide a more convenient, effective, reliable data service to the international world.

- When did you start to look into this need for corporate actions standardization?

We have been providing the corporate actions data service to domestic clients since the establishment of the exchange, and to overseas clients since 2003. Some of the overseas clients requested that the corporate actions data be provided in an international standard format, ISO15022. Therefore, we upgraded the previous corporate actions data service to ISO15022, and started providing a customized data service to overseas clients in 2007.

In September 2008, Shenzhen Stock Exchange and Swift signed a memorandum of understanding at Sibos in Vienna, where both parties agreed to cooperate on the corporate actions data in ISO15022 format through the Swift network. In April 2009, at the China SMPG fourth meeting in Hang Zhou, participants discussed and agreed on the 16 corporate actions templates made by SSIC, which forms the Unified China Securities Market Practice. In late 2009, SSIC joined Swift and became the first in China to provide the ISO15022 corporate actions data service of the Chinese security market via the Swift network.

In terms of XBRL, Shenzhen was one of the first exchanges to study and formulate XBRL taxonomy, and in 2004 all Shenzhen-listed companies were asked to submit the periodic financial reports in XBRL.

- What have been your main achievements in this space up to now?

So far, we have successfully completed the formulation of two international standards, which can both be applied to Chinese security market information. One is ISO15022, and the other is XBRL. Meanwhile, we have been providing the reference data on the Chinese market to clients in both formats.

- Do you think further standardization in this space will require a regulatory push?

Yes. A regulatory requirement or supervision is more effective and efficient for standardization. I think Asian countries such as China have done more and been more successful than Western countries.