Corporate Action Processing Innovations

1
Corporate Action Processing Innovations
2
Corporate Action Processing Innovations

• Standardize Corporate Actions Liability Notices
• Improving Complex Security Income
• Agency Lending Disclosure
• Global Corporate Actions Validation Service

3
Corporate Action Processing Innovations

• Standardize Corporate Actions Liability Notices

4
SMART/Track Corporate Actions Liability
What is it? SMART/Track for Corporate Actions
Liability Notification Service is a web-based
application for the communication and tracking of
voluntary corporate action liability
notices Allows participants to create, send,
process and track liability notices and links the
various parties involved with corporate action
processing
5
Corporate Actions Liability Notification Service

• Announcement Collection
• Collect corporate action announcement information
• Consolidate data and prepare for comparison

• Announcement Validation
• Normalize, reconcile and enrich data
• Validate for accuracy and completeness
• Produce scrubbed announcement record

DTCC Corporate Action Initiatives

• Identification and Notification
• Determine investors impacted by event and
  calculate entitlements
• Notify investors of announcement information

1.
2.
Corporate Actions Liability Notification Service

• Election Processing (for Voluntaries)
• Reconcile elections
• Communicate elections from investors thru various
  financial intermediaries
• Submit instructions before deadline

3.

• Event Settlement
• Deliver securities, if necessary
• Receive securities and/or money payment

4.

• Reconciliation
• Allocate entitlements to investors
• Notify investors of final transactions
• Close-out event

5.
6.
6
SMART/Track Corporate Actions Liability
Bank B
Broker B
Bank A
Broker C
Broker A
Bank C
SMART/Track
Tracking Database
RIPS
7
SMART/Track Corporate Actions Liability

• Functions
• Create and transmit liability for a voluntary
  corporate action to a single or multiple
  counterparties
• Accept/reject a liability notice
• Reduce liability quantity
• Cancel a notice
• Track status of notices sent/received

8
SMART/Track Corporate Actions Liability

• Features
• Web-based
• Automated tracking including numbers of notices
  sent/received and status of each
• Link to DTCs RIPs system for corporate offer
  information
• Automated Alerts for date changes in RIPs that
  affect a liability notice
• E-mail notices at start of day and intra-day for
  notices requiring action that day
• Automatic archiving and retrieval of archived
  notices with 7-year data retention

9
SMART/Track Corporate Actions Liability

• Benefits
• Eliminates the manual paper-based fax and phone
  notification process
• Standardizes market practice for communicating
  liability notifications
• Provides a single point of entry for all
  participants
• Manages message delivery risk through tracking

10
SMART/Track Corporate Actions Liability

• Pilot Program
• Pilot launched in November 2004 with 19
  participants
• 64 pilot participants representing 123 users
• 822 notices transmitted

11
SMART/Track Corporate Action Liability

• Whats next?
• Expect that use of the automated Service will be
  the standard way of sending liability notices
• Working with the NYSE on changing NYSE Rule 180
  to mandate use of SMART/Track for sending
  voluntary corporate actions liability notices

12
Corporate Action Processing Innovations

• Improving Complex Security Income

13
Improving Complex Security Income

• Elimination of contra-CUSIPs for Variable Rate
  Demand Obligation (VRDO) partial calls
• Implement a unified end-to-end platform for the
  asset servicing life cycle
• Establish best practices and performance metrics
  for the handling of complex securities

14
Improving Complex Security Income

• Elimination of Contra-CUSIPs VRDO partial calls
• Effective with the November 1, 2005 redemption
  date
• Called positions will be segregated into the
  Called Account under the regularly assigned CUSIP
  number
• Lotteries for late call notices or revisions to
  previously paid out items received after November
  1, 2005, will also be processed without
  contra-CUSIPs

15
Improving Complex Security Income

• Implement a unified end-to-end platform from
  issuance through the entire asset servicing life
  cycle
• Underwriting
• Corporate Actions
• Masterfiles

16
Improving Complex Security Income

• Establish best practices and performance metrics
  for the handling of complex securities
• Post-payable adjustments for complex securities
  decreased by 6 from Q1 to Q2
• Work continues with the major paying agents to
  identify root causes of errors and implementing
  process improvements where feasible
• DTCC is also planning on broadening its working
  relationship with other industry associations and
  participants to collaboratively progress the
  streamlining of Asset Backed Securities
  processing

17
Corporate Action Processing Innovations

• SMART/Track for Agency Lending Disclosure

18
SMART/Track Agency Lending Disclosure
What is Agency Lending Disclosure?

• Industry initiative to provide greater
  transparency in securities lending transactions
• Agent lenders will be required to disclose
  principal lender information on open loans to
  borrowers on a daily basis for credit monitoring
  and capital requirement purposes in 2006

19
SMART/Track Agency Lending Disclosure
What is DTCCs Role?

• Approached by the Task Force for Agency Lending
  Disclosure in 2003 to develop a communications
  facility for the transmission of periodic and
  daily loan files between agent lenders and
  borrowers

20
SMART/Track Agency Lending Disclosure

• SMART/Track has two functions
• Communications facility for transmitting data
  files
• Web application for viewing file transmission
  status and searching/requesting unique identifiers

21
SMART/Track Agency Lending Disclosure

• Transmission of loan files
• Agent lender and borrowers can send loan files
  directly to SMART/Track or through a vendor
  (SunGard or EquiLend) using
• FTP
• NDM CONNECTDirect, or
• FTP over the internet

22
SMART/Track Agency Lending Disclosure
Agent Lender
Agent Lender
SMART/Track For Agency Lending Disclosure
23
SMART/Track Agency Lending Disclosure

• Web Application allows users to
• Search for or create unique identifiers for those
  principal lenders that do not have U.S. tax
  identification numbers (required in the data
  files)
• View the transmission status of files sent
  directly through SMART/Track to a counterparty

24
SMART/Track Agency Lending Disclosure

• To sign up
• Contact your DTCC Account Executive, or
• Call DTCC Relationship Services at
• 800-422-0582

25
SMART/Track Agency Lending Disclosure

• For more information about the Agency Lending
  Disclosure initiative, visit the Task Forces
  website at
• www.agencylending.capco.com

26
Corporate Action Processing Innovations

• Global Corporate Action Validation Service

27
Global Corporate Action Validation Service

• The Global Corporate Action (GCA) Validation
  Service provides a centralized source of scrubbed
  information about corporate actions for nearly
  100 event types for instruments traded in Europe,
  Asia-Pacific and the Americas

28
Global Corporate Action Validation Service

• Announcement Collection
• Collect corporate action announcement information
• Consolidate data and prepare for comparison

• Announcement Validation
• Normalize, reconcile and enrich data
• Validate for accuracy and completeness
• Produce scrubbed announcement record

DTCC Corporate Action Initiatives

• Identification and Notification
• Determine investors impacted by event and
  calculate entitlements
• Notify investors of announcement information

1.
2.

• Election Processing (for Voluntaries)
• Reconcile elections
• Communicate elections from investors thru various
  financial intermediaries
• Submit instructions before deadline

GCA VS
3.

• Event Settlement
• Deliver securities, if necessary
• Receive securities and/or money payment

4.

• Reconciliation
• Allocate entitlements to investors
• Notify investors of final transactions
• Close-out event

5.
6.
29
Global Corporate Action Validation Service

• The GCA Validation Service delivers
  standardized, comprehensive and timely
  information to financial institutions of all
  types and sizes.
• Broker/Dealers Banks
• Investment Managers Hedge Funds
• Any firm that tracks corporate action
  information and its impact on securities
  positions

30
Global Corporate Action Validation Service

• How does it Work?
• The service validates data through an intricate
  process of mapping, normalizing and consolidating
  announcement information
• Skilled professionals enrich the data through
  follow-up research relying on a wide array of
  sources
• Customers submit a securities of interest file
  and have the GCA VS monitor and report on these
  specific securities throughout the day

31
Global Corporate Action Validation Service

• How does it Work? (continued)
• Customers receive a common composite record for
  each announcement
• A file of these records is available six times a
  day and includes event data for each composite
  record created or updated since the last
  publication
• Real-time, around-the-clock access to information
  through a secure, Web-based inquiry tool provides
  the most current version of the composite record
• A custodian verification feature compares and
  validates customers corporate action
  announcement information from other sources (e.g.
  Custodians, Prime Brokers)

32
Global Corporate Action Validation Service

• Benefits
• Reduce operational losses
• Optimizes front-office trading
• Simplifies operations globally
• Streamlines data sources
• Provides a smooth access to information

33
Global Corporate Action Validation Service

• London Service Center
• Service Delivery
• Help Desk Support
• Hours of Operation
• Monday through Friday
• 8am - 6pm (local time)

• Shanghai Service Center
• Service Delivery
• Help Desk Support
• Hours of Operation
• Monday through Friday
• 8am - 6pm (local time)

• New York Service Center
• Service Delivery
• Help Desk Support
• IT Infrastructure
• Vendor Management
• Client and Service Management
• Governance
• Hours of Operation
• Monday through Friday
• 8am - 6pm (local time)

• Language Coverage
• English
• Spanish
• Portuguese
• German
• Italian
• French
• Chinese
• Japanese
• Arabic
• Turkish
• Bengali

• Help Desk Support Phone Logistics
• Domestic 866-DTCC-GCA
• International 1 212-855-2366

• Online Inquiry URL Logistics
• https//gca.dtcc.com

• GCA Web Page
• www.dtcc.com/GCA

• E-mail Support Logistics
• gcabusiness.support_at_dtcc.com
• gcatechnical.support_at_dtcc.com

34
Global Corporate Action Validation Service
35
Global Corporate Action Validation Service
36
Global Corporate Action Validation Service

• Find out how we can help you drive efficiency
  for corporate actions Contact us at
• 1-866-382-2422 or
  gcainfo_at_dtcc.com