SWIFT Collaborates with DTCC and XBRL US to improve US corporate actions processing
Joint initiative to reduce costs and promote straight-through processing of corporate actions
Published on 5 June 2009
Every year approximately 200,000 corporate actions are announced by publicly traded companies and other issuers in the US.
This is significant because most of these announcements still require many manual steps. This, in turn, makes the processing prone to errors, as well as time-consuming, costly, and inefficient. Over the years, this situation has resulted in heavy losses and significant negative impact on investors across the financial community.
In fact, a 2006 study by the independent research firm Oxera (UK) found losses on corporate actions worldwide were between EUR 300 and 700 million 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.
To help mitigate these problems and drive down the costs associated with processing corporate actions, SWIFT has joined forces with DTCC and XBRL US to fix the problem.
The resulting plan is outlined in a ‘Statement of Direction' which builds on the existing ISO standards that have already brought important efficiencies in the corporate actions process and integrates the benefits of XBRL electronic data tagging technology.
XBRL is already mandated for adoption by public corporations in the US, as well as many other countries, to streamline the disclosure of financial reporting. The plan includes the following steps:
- The three organisations will work together to build a corporate actions taxonomy, or classification, aligned with ISO 20022 repository elements. This new taxonomy will support a seamless transition from issuer-generated documentation to data, using XBRL technology. This will enable issuers to tag, or electronically capture and identify, key data such as the terms of a reorganisation when preparing documents for a corporate action.
- 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.
Commenting on the work with DTCC and XBRL, Chris Church, SWIFT Global head of securities, said, "Collaboration amongst SWIFT, DTCC and XBRL will promote straight-through processing of corporate actions by electronically capturing data directly from issuers or directly at the point that a corporate action is announced and in a standardised format.
We believe this initiative will improve transparency and communication between issuers and investors, which in turn will bring greater accuracy, reduced risks and costs to the industry."
Going forward, SWIFT will continue to build on its success in the US working with XBRL US and DTCC and extend the relationship with XBRL into other regions across the globe working with local market infrastructures.
Church added, "This is a global issue, but the work we are doing in the US as a start is a stepping stone to making a bigger difference for the industry."