Battling Inertia In Corporate Actions

Reflecting on the corporate actions webcast conducted last month, we saw ongoing concern about some of the same automation issues that have been at the forefront of the discussion for months and possibly years.

That similarity extends right down to the responses to a poll question from a March webcast that was re-asked in this event, concerning what parts of the corporate actions lifecycle firms have automated. In both instances, we allowed respondents to choose more than one response, and still the percentages of the responses were nearly the same:

• Event management—July, 46%; March, 55%
• Position management—July 41%; March, 39%
• Election management—July 26.5%; March, 25.5%
• Entitlement calculation & posting—July 25%; March, 24%
• No parts of the process—July 32.5%; March, 29%

The repetition is reminiscent of a memorable moment from the 1990s US television series "Homicide," a critical and personal favorite. Its very last episode, "Forgive Us Our Trespasses," began with a montage of Detective Bayliss, played by Kyle Secor, repeatedly going to the courthouse for several attempts to begin a murder trial, thwarted by the lack of one resource or another—the first time, no courtroom is available; the second time, the prison doesn't send the defendant over; and on the third and final try, the district attorney is tied up and can't attend.

As with Bayliss' courthouse odyssey, corporate actions processing has several pieces and steps that all have to fall into place to proceed. If any one of these is missing, the defendant goes free or the corporate action won't get processed correctly. In large institutions, it's a challenge to find some way to correct the problem short of—spoiler alert—going vigilante as Bayliss does.

In this latest webcast, SunGard XSP's Daniel Retzer coined a "Next Two Years Effect" title for the inertia of firms' pushing back plans to automate corporate actions processing. Barclays Capital analyst Selvaraman Ponniah, speaking about messaging standards issues in corporate actions processing, said regulatory or industry pressure is needed to spur change. This could be true for automating all the other aforementioned parts of the corporate actions process.

While a financial services function like corporate actions processing is unlikely to get a vigilante that would be effective in forcing improvements, it's become apparent that momentum must be built and propelled from somewhere, by somebody.