Information for Securities Firms Worldwide
New York, April 24, 2003â The Depository Trust & Clearing Corporation (DTCC) today announced the launch of the Global Corporate Action (GCA) validation service, which will reinvent the way corporate action announcements are managed by financial institutions worldwide, helping to eliminate redundant operations and technology.
GCA gives clients access to an automated, centralized source of "scrubbed" corporate action announcement information, enabling them to streamline communications, reduce costs, lower operational risk and improve the quality of information distributed.
GCA analyzes a broad array of corporate action information, including data sourced from a wide range of commercial information providers. This eliminates the current need for each firm to perform this work itself, simplifying the entire process from the initial announcement capture through data validation. GCA applies a broad definition to corporate actions to include both straightforward mandatory events and more complex voluntary offerings.
"Our goal is to provide a seamless corporate action announcement solution, so that all financial institutions can receive the accurate and comprehensive information they need at the same time," said Donald F. Donahue, DTCCâs chief operating officer. "With GCA, weâll deliver better data quality and huge economies of scale to banks, broker/dealers and other financial institutions worldwide."
This month, DTCC launched a pilot of GCA with a major global securities firm. Several other firms that are high-volume processors of corporate actions will follow shortly. Over the past year, these firms have been working closely with DTCC to define requirements for GCA, which is targeted for full production by yearend. Initially, GCA covers securities traded in the Americas and Europe, and by yearend will provide worldwide coverage.
DTCC teamed with Accenture to build this new service. Accenture provided program management support, helped to implement GCAâs underlying technology solution and is continuing to work with DTCC in enhancing the operating environment.
"Corporate action processing is an area of significant risk in the securities processing business," said James Femia, managing director, DTCC Asset Services. "The exposure associated with an individual corporate action event potentially involves millions of dollars."
Corporate action processing is also known to be one of the most manual, complex and challenging parts of back-office operations globally. Every day, securities firms are inundated with news of various corporate actions, such as stock splits, spin-offs, bankruptcies, calls, conversions, exchanges, mergers, tender offers and cash dividend announcements. Conflicting and incomplete information, incorrect data and late notification are common problems that can result in late payments, market risk, loss of interest, or a missed opportunity that could cause significant monetary loss.
"Our 30 years of experience in corporate action processing is well known throughout the industry," said Donahue. "Weâre now leveraging that experience to support the growing need for access to automated, standardized corporate action announcement information to lower risk and drive down cost for the industry on a global basis."
In 2002, DTCCâs depository processed a record volume of corporate actions, including reorganizations, redemptions, dividend and interest transactions, with a value of nearly $2 trillion. Each corporate action has a multiplier effect. A single event may involve hundreds of financial firms, which then results in thousands of communications sent and/or payments allocated to investors.
"Rather than have each bank and broker/dealer maintain its own operation to collect and verify corporate action announcement information, weâll provide the single right answer," said Femia. "Our experience in bringing greater efficiency to high-volume processing makes this an ideal business for outsourcing to DTCC."
GCA validates data through an intricate process of mapping, normalizing and consolidating the information â generally referred to in the industry as scrubbing â supported via XcitekSolutionsPlusâ XSPâ¢ corporate actions data management module. GCA also enriches the data with follow-up research by experienced professionals and information from custodian banks. The custodian verification component of GCA is planned to be available later this year.
Custodian verification, according to Femia, is an important part of what will set GCA apart from other service providers in this market space. "We recognize the vital role that custodians play in the process," he said. "Weâll act on our participantsâ behalf, going to their custodians to verify data, while protecting the proprietary nature of the custodiansâ information."
"The initial response from customers weâve talked to about GCA has been very positive," Femia said. "As the volume of corporate actions increases worldwide, this is a unique opportunity to address our customersâ demand for centralized and accurate corporate action information to help them better manage costs and risks."