DTCC Asks SEC to Allow XBRL Tagging for Corporate Actions
The Depository Trust & Clearing Corp. is trying to make the process of receiving and distributing information from corporate issuers a lot less difficult -- and risky.
It has just asked the Securities and Exchange Commission to allow it to receive information from issuers about an array of dividend and income payments as well as reorganizations in machine-readable format relying on XBRL tags.
As the umbrella organization for clearing and settling U.S. securities transactions, DTCC plays a critical role in distributing information on corporate actions. It sends over 100,000 notifications on corporate actions to its members annually.
Relying on the XBRL tags to identify critical elements in the notifications on corporate actions allows DTCC to disseminate all of the necessary information into ISO 20022 compliant formats to send to its participants. Gone is the need to reinterpret and key in data from paper documents -- a time consuming and error-prone process. Now distributing information on corporate actions using legacy formats as well as ISO 20022 formats, DTCC plans to switch over completely to ISO 20022 formats by 2015.
'By having the information come to DTCC tagged electronically with XBRL taxonomy, data can be loaded directly into our new Worldwide Announcement Validation Enrichment System which currently produces the ISO 20022 compliant formats and communicates information to our customers, and subsequently, the end investors," says Daniel Thieke, DTCC's managing director for asset services. The DTCC has modified the ISO 20022 corporate action notification formats accredited by the International Organization for Standardization (ISO) to accommodate the U.S. securities market.
DTCC made its request to the SEC last month and it will likely be approved just in time for DTCC to receive in the fall dividend announcements from depositary banks for dividends involving sponsored American Depositary Receipts. “DTCC hopes that this initial proof of concept will demonstrate the benefit of electronically tagging event information, and lead to this becoming more common amongst issuers and their agents”, said Thieke. Bank of New York Mellon; Citi; JP Morgan and Deutsche Bank serve as the depositary banks for ADRs and in that role are responsible for distributing information on the ADRs to financial intermediaries and investors. ADRs are a popular among US investors who want to tap into global markets without incurring the cost and administrative hassles of buying the stock of a foreign company.
Corporations typically send out information on corporate actions to financial intermediaries, market infrastructures and regulatory organizations but without any tags identifying common data elements it is difficult to know just what the information is all about. While custodian banks and fund managers have begun to embrace the use of ISO 20022 formats to communicate corporate action details and decisions with each other, issuers have been a lot slower to embrace XBRL tagging for corporate actions -- a process which would make it a lot easier for financial intermediaries to convert the tags to ISO 20022 messages. Those financial intermediaries are on the hook for any mistakes in the information they transmit on corporate actions. So far, the SEC has only required XBRL tagging for financial reports and issuers aren't convinced of the financial merits of using it for corporate actions.
The DTCC has teamed up with SWIFT and XBRL US, the US arm of XBRL International, to promote the use of XBRL tags from issuers related to corporate actions and the use of ISO 20022 message types for financial firms to forward information to investors. SWIFT operates a global network through which thousands of financial firms communicate using ISO-compliant messages and the XML-based ISO 20022 messages are upgrades to inefficient legacy messages.
DTCC has been working with BNY Mellon and Citi on tagging information on dividends related to ADRs since late last year and DTCC can receive information in tagged documents to notify its clients. Separately, also last year, DTCC and SWIFT started a pilot program allowing BNY Mellon; Brown Brothers Harriman; JP Morgan and National Financial Services, LLC to receive information on all corporate action types in the ISO 20022 formats through DTCC. DTCC has not announced which financial firm will be first up to receive live ISO 20022 messages only, instead of both ISO 20022 and proprietary message types.
Written by Chris Kentouris, Editor-in-chief (Chris can be contacted through Chris.Kentouris@hotmail.com)