Slide 1 20061109_ACSDA

ACSDA - Sao Paulo, 9th November 2006

“Invest, complyand reap the rewards”

The new buzz words in Corporate Actions

John Falk

Slide 2 20061109_ACSDA

INVESTINVEST

COMPLYCOMPLY

REAP THE REWARDSREAP THE REWARDS

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The chain…

Depository/Exchange

Client

Issuer’s Agent

Market Data Vendors

GlobalCustodian

Sub Custodian

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INVEST: cost benefit analysiscost benefit analysis

Budget approval starts with a business case specifying the Cost-Benefit-Analysis and Return on Investment

But, how do you measure potential risk?

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INVEST: building a business casebuilding a business case

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INVEST: measuring riskmeasuring risk

External risk factors

– Corporate action type

– Country of issue/issuer

– Price volatility

– Default options

Internal/proprietary factors

– Agent performance

– Levels of STP for corporate actions processing

– Number of accounts

– FX exposure, level of stock lending activity, tax complexitySource: STP Magazine April 2005: Adam

Stern & James Levi

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““We have to focus on how we are We have to focus on how we are going to implement Standards, at the going to implement Standards, at the

same time and in the same way, same time and in the same way, across all markets.”across all markets.”

Michael Kempe - Euroclear Michael Kempe - Euroclear Sibos Copenhagen 2005Sibos Copenhagen 2005

COMPLY

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Securities Market Practice Group

Create globally agreed market practice which, integrated with standards, will bring STP.

STP

StandardsStandards

Market PracticeMarket Practice

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National Market Practice Groups

US IL

UK/IEDK

NO

TR

SG

AU

FRJPCH

DE

ES

FI

BELU

NL

SE

ZA

A role for ACSDA?

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SMPG

Market Practice means

– No requirement for bilateral implementations

– Develop once and use with everyone Success of Corporate Action

implementation depends on adherence to Market Practice

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A world without SWIFTDifferent Standards, Messaging & Connectivity

MarketInfrastructures

User

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Single Window from SWIFTReusing Standards, Messaging and Connectivity

MarketInfrastructures

User

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The five ISO 15022 CA message types

MT 564MT 564 Notification Notification

MT 565MT 565 InstructionInstruction

MT 566MT 566 ConfirmationConfirmation

MT 567MT 567 StatusStatus

MT 568MT 568 NarrativeNarrative

1,0001,000 Sending and Sending and 3,0003,000 Receiving, in Receiving, in 140140 countries. countries.

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SWIFTNet Data DistributionData Providers on SWIFT

Market InfrastructuresMarket Infrastructures

DTCC GCA service

London Stock Exchange

Tokyo Stock Exchange

SG Stock Exchange

AU Stock Exchange

Clearstream

Canadian Depository

Data ProvidersData Providers

FT Interactive Data

Telekurs

WM Datenservice

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InitiatorInitiator

Information Information providerprovider

Local Local marketmarket

FacilitatorFacilitator

InvestorsInvestors

Issuer Registrar/Transfer Agent

Market dataprovider

Stock exchange

CSD

Proxy agency

Custodian Proxy agency

Proxy agencyCustodian

Broker Fund/investment manager

CSD

CSD

Registrar/Transfer agent

Insurance company

SWIFTNet Proxy VotingRoles and Players

Meeting notification process(via an information provideror not)

Voting process

Finalisation process

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Value/Benefits for the industry

Reduction in risk associated with errors Cost savings Streamlining and standardisation of deadlines Audit trails/transparency Volume insensitiveness Future proofing to comply with regulatory

requirements Ability to integrate new customers/agents rapidly

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Reap the rewards

Move from “management by review” to “management by exception”

Greatly improved visibility into exceptions Audit trail greatly improved Prioritisation by date and market value to

determine resource Reduced errors

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Conclusion

““Automation of corporate actions Automation of corporate actions delivers premier customer service, delivers premier customer service,

attracts more business and manages attracts more business and manages risk in a very, very complex process.”risk in a very, very complex process.”

David Kane, JM Morgan Securities David Kane, JM Morgan Securities Sibos Copenhagen 2005Sibos Copenhagen 2005

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and a date for your diaries

BostonOctober 1-5, 2007

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ACSDA - Sao Paulo, 9th November 2006

“Invest, complyand reap the rewards”

The new buzz words in Corporate Actions

John Falk