The Depository Trust & Clearing Corporation (DTCC), Swift and XBRL US have joined forces in a bid to improve communications between issuers and investors for corporate action announcements in the US market.
The partners claim they will "fundamentally change" corporate actions announcement processing, bringing greater accuracy, and reduced risks and costs by improving transparency and communication between issuers and investors.
The firms say that on average, 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 US.
Because the processing of these announcements throughout the corporate actions lifecycle is mostly handled manually, these practices remain beset by error-prone, time-consuming inefficiencies, creating the potential for heavy losses and significant negative impact on investors.
The partners cite a 2006 study from research firm Oxera which found losses on corporate actions worldwide were between $400 and $900 million each year.
The group's plan, outlined in a statement of direction, will look to build on the existing ISO standards by integrating the benefits of XBRL electronic data tagging technology, already used by public issuers in the US, to streamline the processing of corporate action announcements.
The three organisations will work together on 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, enabling 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.
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 be decommissioned by 2015.
Chris Church, CEO, Americas and global head of securities, Swift, says "our initiative will increase the return on investment for the industry's existing market infrastructures by bringing greater efficiencies and reducing the costs and risks associated with processing corporate actions. Manual interpretation, re-keying and manual exceptions in corporate action processing will be significantly reduced."