Michael Shashoua: Game of Global Communication

Risk management appears to be the most popular reason for improving corporate-actions processing in the financial services industry. That was borne out last month in answers to a question posed during a webcast discussion sponsored by Thomson Reuters, and in April in responses to a poll question posed during an Inside Reference Data-hosted webcast.

Thomson Reuters is leading the charge on promoting migration to the more advanced ISO 20022 messaging standard for corporate actions, an upgrade from ISO 15022, which originated about 15 years ago. Joined last fall by Brown Brothers Harriman, the Depository Trust & Clearing Corp. (DTCC), Fidelity ActionsXchange, Information Mosaic and XSP, the company created an alliance to that end.

Tim Lind, global head of enterprise content, middle office, at Thomson Reuters, goes so far as to apply a teaching from Rev. Martin Luther King Jr. to these efforts: “A genuine leader doesn’t search for consensus but is a molder of consensus,” Lind says. “So we want to drive the debate and those who are engaged to help create a plan that will reduce potential fragmentation.”

The Value of ISO 20022
More than any other action, it now appears that the ISO 20022 upgrade will be the most important step toward addressing those risk management concerns driving changes in corporate-actions processing. “ISO 20022 is primary to reduce risks and save on costs,” says Justin Chapman, global head of process management at Northern Trust. “It’s a big investment for us in 20022. It’s a key project for us. There’s definitely a benefit from 20022.”

The DTCC is an influential force pushing the move to ISO 20022, with its Corporate Actions Reengineering Project targeting a complete migration by 2015. The DTCC project makes it possible for large global custodians to automate formerly manual US domestic corporate actions, according to Malene McMahon, senior business manager, securities initiatives, at Swift Americas and a co-executive sponsor of ISITC North America’s Corporate Actions Working Group. The DTCC project also follows the US trend of skipping right over 15022 by parties who did not have it in place, she notes. “Election processing in particular is what larger volume clients are really looking forward to automating, as the reengineering project encompasses all those downstream processes,” she says.

With messaging dominating the conversation about corporate-actions processing, improving communication has become key.

Addressing Regional Differences
As the US moves more quickly and aggressively to ISO 20022, so is the Asia-Pacific region, with European markets still mostly holding off, or just trying to make their way to ISO 15022, creating a possible divide. “Any organization outside the US or North America—the clients and organizations we talk to in Europe aren’t looking at migration plans as much,” says Gerard Bermingham, senior vice president of business strategy at Information Mosaic. “Europeans have made a lot of investment on the 15022 side. They see a lot of benefit, particularly on announcements. So they’re happy with that. Unless there’s some force behind them saying they need to move to 20022, there’s less incentive for them to do so.”

In Asia, Singapore and Japan have notable initiatives for 20022 migration already under way, adds Bermingham.

The Challenges in Messaging
Still, financial firms are likely to have challenges in any region when it comes to this key corporate-actions processing upgrade. As Northern Trust’s Chapman says, “My biggest challenge is taking any form of messaging—15022 or 20022—further up the value chain.”

With messaging dominating the conversation about corporate-actions processing, improving communication has become key to better risk management that so much industry polling and feedback tells us is the greatest concern. So where there are doubts or resistance to upgrading those messaging standards, the industry’s own sentiment should be the driving force to push them through.