A clear path ahead
Standardized practices offer significant cost reductions and strategic advantages across the industry. Recent research shows 30% of issuers anticipate halving their costs through automated notifications. Investors could similarly benefit from automation, with annual savings estimated around USD680,000 per firm from improved data accuracy and streamlined processes.
Evidence from regulatory frameworks like SRDII demonstrates the tangible benefits of standardization and automation, significantly enhancing operational effectiveness and investor satisfaction. Aligning industry practices around a standardized, centralized data source also promotes greater market stability, reduces systemic risks, and enhances transparency and investor communication.
Recommendations for Industry-Wide Action
To realize these benefits, the industry must:
Support transformational automation by issuers and their agents, so that event automation can be transmitted seamlessly across the industry
Ensure industry consistency through a single point of accountability and validation for events
Support global standards in helping to reduce variance in message content and formats
Now is the time to actually address the problems in corporate action processing… spending $58 billion per year is completely unsustainable
Tim Lind, DTCC
As one member of an industry standards committee emphasized, “Collaboration around data standards must be our collective priority; it’s the cornerstone of risk reduction and achieving scalable efficiency.”
The time is now…
The scale of inefficiency and cost in corporate actions processes clearly illustrates the urgent need for change, we simply cannot continue paying $58 billion per annum to process corporate events. The financial services industry as a whole has a cost problem and so must work together like 'a team sport' and embrace standardized, interconnected data practices to reduce operational risks, lower costs, and deliver enhanced investor value to the tune of $15 billion to the industry and return $259 to each US investor.
Incremental improvements are no longer enough. The industry must now commit to transformative change through real-time data integration and collaboration. Achieving near-instantaneous data consensus, represents a clear, achievable goal that can fundamentally transform corporate actions, significantly improving investor outcomes and market efficiency.
By transitioning to a golden source model with DTCC as the central data utility, the industry can achieve significant improvements in efficiency, risk management, and investor confidence. The potential operational and financial rewards significantly outweigh the investments required to implement these transformational changes. As clearly articulated by a senior advocate at a major pension fund, “The time for collective action is now. The long-term costs of inaction far exceed the short-term investments needed to modernize and standardize our operational practices.”