Realising corporate action transformation
ASX case study
Over the next three years, 48% of the market plans to revise their data sourcing in Australia – focusing specifically on new data feeds. That these plans come higher in the order of priority than hiring and deploying robotics shows that investors and their intermediaries are all focused on a single, common objective: getting the data right.
Even with a compelling business case that continues to deliver new and unexpected benefits, the path towards meaningful corporate action automation can be long and complex.
So what does the corporate action transformation journey look like? How do we break it down, what are the key enablers to success and what obstacles should we expect to face along the journey?
Based on interviews with existing users of the ASX Real Time Corporate Actions service and with corporate action experts across the Australian market, this paper combines extensive market perspectives with extensive, statistical research from our 2022 "Corporate Action Transformation in Australia" study.
Our aim in this paper is to give you a clear, market-based view of the case for corporate action transformation in Australia - helping you to scale your back office activities.
“We’ve seen at least an 80% increase in STP since we started using the new ASX feed”
Mark Wootton, Regional Head of Local Custody and Clearing Product for Asia-Pacific, Securities Services at BNP Paribas
Laying solid foundations
There is universal consensus around the key starting point for corporate action transformation projects: which is securing (scarce) support from subject matter experts (SMEs).
This is not as straight forward as it may appear, with many SMEs already playing a critical role in supporting the day-to-day operations of event management and with little capacity for additional change management.
Success in this space has come from drawing in SME support through gradual, incremental steps – defining one event at a time – and giving the SMEs full ownership, so that they can reap the rewards of the automation once complete.
“These projects succeed and fail because of the subject matter experts that support them”
Business Head, Leading custodian bank
Our first step has been to separate our data from our core systems. If we had to hard code every data change the whole project would have failed
Product manager, Leading custodian bank
Transitioning any data source means change. From large-scale changes in messaging formats to subtle changes in data definitions, users must be set to absorb a high degree of data variance as they execute on their data transformation.
Absorbing this change within core processing systems is anecdotally impossible – even if it seems manageable at the project outset. Successful projects have consistently relied on data processing layers that sit outside core systems and that are designed expressly to adapt data formats and contents easily.
Beyond just corporate action SMEs, “it takes a village” to successfully realise the benefits of corporate action automation projects – including IT, operations, compliance and legal and sometimes even treasury functions.
With all of these specialists already heavily engaged in numerous market change projects in Australia, competition for this expertise inside every firm is intense.
All the more reason then to make sure that the business case and benefit statements that underpin these transformation efforts are water-tight – so that resources can not only be allocated to corporate actions in the first place but also remain allocated until the job is done.
Competition for change management resource is intense in Australia right now
Head of Operations, Leading custodian bank
Trust and alignment
All users of the ASX Real Time Corporate Actions service have undergone a journey in integrating and relying on their new data source.
This journey has built up incrementally for each firm. Working in partnership with the ASX, data definitions and structures have evolved one step at a time, with firms engaging to gradually shape the Service’s roadmaps and increase the value of the feed with each release.
Naturally this is not a ‘straight-line’ of growth. Users have highlighted the fact that, with each new release comes new benefits and new costs. Redevelopment is often needed, even if the changes themselves are valuable.
Using the ASX feed has been a journey of alignment over the 4 release phases
Regional Product manager, Leading custodian bank
“We’ve taken 6-9 months to really make sure we’re comfortable trusting this feed as our single source”
Regional Head of Custody Product, Leading custodian bank
Alongside data formats and system connectivity, the question of trust is an essential part of every deployment. In a heavily regulated operating environment, the concept of actually removing layers of data verification seems almost counterintuitive. Before any decision can be taken to move to any single information source, numerous stakeholders, risk committees and product owners need to be satisfied that they can take accountability for the data in front of their own clients.
Users have described lengthy and systematic periods of 6-9 months of data validation prior to switching over. And in some cases internal system limitations can make this phase even longer.
A key point of discussion for any golden copy market feed is what happens when it is wrong. Who is to blame and in what capacity?
In an era of intense regulatory oversight and risk management, this question is a key check-point on the adoption and execution journey.
Successful projects have broken this issue down into two parts. First is that no market data feed has ever carried liability for its contents – meaning that this new solution is no worse than its predecessors. Second is that, with each intermediary now only passing through event data (with no rekeying or interpretative risk at each step), the reliability and security of the data is much higher. Only technical faults could explain data issues in the new world – as opposed to myriad manual and human challenges that we have seen before.
“Liability for this new feed is no different from what went before”
Head of Client Servicing, Leading custodian bank
Client acceptance
We’ve had to spend 50 man-days “dumbing down” our corporate action feeds to make sure that all of our clients could use them
Head of Client Servicing, Leading custodian bank
Although a logicised, real time, golden copy data feed can bring significant benefits, not everyone is ready to harvest those benefits on day one.
Many providers have cited the challenge of having to retro-fit their ISO 20022 messages into an older ISO 15022 format, in order to ensure that existing clients are able to receive it – sometimes delaying the value of the solution to all parties.
This challenge is widespread and has most successfully been addressed through active client engagement – to ensure that end-customers see a solid and robust case for transformation in their own firms.
This retro-fitting is not a one-time decision. With every new data release, intermediaries (notably custodians and brokers) need to ensure that they have a clear view of how much change can be safely passed onto end-clients. Again, transparent client communications are key here – to ensure that end-clients can derive maximum benefit from ongoing product releases – at the right pace.
Our ongoing data governance is really key: what changes do we absorb and which ones do we pass on to clients?
Head of Product, Leading custodian bank
A continuing journey
Elections and tax are the next big things for us. Elections are where the errors happen.
Regional Head of Custody Product, Leading custodian bank
With the aim of “fully managing the event”, market participants see two key areas where future evolution is key.
First is on the full wealth of tax information and treatment tables – which are not usually sourced through the ASX but which are critical components in the handling of many complex corporate actions in Australia.
Second is the management of the election or instruction – where much of the event risk continues to reside and where standardisation of treatment will bring equal benefits to those seen so far in notifications.
With issuers continuing to innovate in their corporate actions every day and individual firms continually challenging existing data standards, the need for transparent, ongoing roadmap governance is critical.
Working together as an industry, firms cite the need to ‘never stop trying’ to evolve and shape the corporate actions service in order to ensure that it evolves in close step with the wider market.
Partnership and governance is critical to help shape the future roadmap
Regional Head of Custody Product, Leading custodian bank
“There is always going to be 10% of events that we can’t automate because of the continuous innovation in the market – but we need to team up to keep the rest as straight-through as we can”