Corporate%20Action%20Reengineering

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• Corporate Action Reengineering
• BDUG Conference
• October 18th 2006

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SOURCESecurities Origination Underwriting
Reliable Corporate action Environment
A unified end-to-end platform from issuance
through the entire asset servicing life cycle
Underwriting Corporate Actions integrated
with Master files and other Core Depository
functions

Security Master Files
Corporate Actions
Underwriting NIIDS
Shared Interfaces
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Reengineering Objectives

• Provide more accurate and timely servicing
  information
• Replace legacy sub-systems with newly architected
  platform
• Automate and streamline redundant processes and
  data storage
• Increase flexibility with rules-based system
• Enhance functionality ISO15022, multi-currency
• Reduce ongoing technology support costs
• Consistency of processing Common field
  definitions and business rules
• Revamp New Issue Information Dissemination

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Current State of New Issue Processing

• New Issue Information Dissemination
• Syndicate Desk Communicate to members of the
  underwriting syndicate Automated/Manual
• Syndicate Desk Communicate to the street
  (Vendors/non syndicate members) Manual
• Trading of New Issue
• Middle Office (Trade support)
  Procurement/Receipt and Set up of New Security
  Master Data - Manual at firm or vendor
• DTC Eligibility, Closing and Distribution
• Syndicate Operations Communication to DTC and
  other industry utilities - Manual

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Future State of New Issue Processing

• New Issue Information Dissemination How will
  DTCC automate?
• DTCC is linking with major book building/running
  services (Bondesk Syndicate, Dealogic, i-Deal,
  Marketpipe, NAPA, Bloomberg Deal, ZIA)
• DTCC has flexibility to link with underwriters
  proprietary book building/running, trade
  processing, security master system(s) or service
  bureau
• DTCC is linking to information service providers,
  service bureaus, participants, and regulators
• Trading of New Issue How will DTC automate?
• DTC will provide for real time distribution of
  new issue information required for security
  master set up for DTC Participants and Bank
  Custodians.
• DTC Eligibility, Closing and Distribution How
  will DTC automate?
• Syndicate Operations DTC will store new issue
  information for the purposes of eligibility
  closing and distribution

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Future State Benefits New Issue Information
Dissemination

• Avoids re-keying STP from bookbuilding/running
  systems
• Automated regulatory compliance of MSRB rule G34
  and NASD rule 6260
• Automated dissemination to vendors in real time
  Bloomberg, Interactive, SP, ect
• Facilitates faster processing of secondary market
  trades - Automated receipt of security data in
  real time
• Facilitates compliance of new SEC access
  delivery rules for prospectus delivery

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NUWS / NIIDS Project Milestones

• Completed Proof of Concept Q3 2006
• Commence UAT Q4 2006
• Commence testing with vendors and pilot firms
  Q1 2007
• Begin transition Q2 2007
• Go live - August 2007

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• Corporate Action Processing and Announcements

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Project Milestones

• Complete analysis and functional design Q2 2006
• Release file layouts to industry Q4 2006
• Complete development Q3 2007
• Initiate UAT Q4 2007
• Commence transition Q3 2008

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Industry Outreach - Communication

• Aggressive outreach program includes
• Participants
• Vendor/service bureaus
• Agents
• Guidance Council
• Communications approach
• Focus sessions
• Website (host webcams, FAQs, and presentations)
• eLetter
• News releases

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System Implementation (Transition and Migration)

• Current focus on data migration
• Parallel testing
• Execute migration procedures
• User access
• Testing of all functionality
• Phased approach
• MMI
• Distributions and Redemptions
• Mandatory events
• Voluntary events and Mandatory with Option events

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System Implementation (Transition and Migration)

• Risk mitigation is key decision driver
• Process
• Architectural proof of concept
• Test concepts
• Test code compliance with industry standards
• Use of best practices
• Security analysis (code vulnerability)
• Iterative

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System Implementation (Transition and Migration)

• Testing Game Plan
• Final UAT - 9 months
• Scripted - 4 months
• Parallel - 5 months
• Execute talkback process between production and
  parallel e.g. instructions
• Transition to begin post successful parallel

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Training

• DTCC has partnered with a vendor for Underwriting
  as test case
• Learning Approach
• Context sensitive help
• E Learning
• Instructor lead training
• Job aids
• User manual
• Service guide

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Corporate Action Announcements - _at_Source2007
Strategic Plans

• Service Offering
• Fees based on existing fee schedule
• No additional charge for the universe
• Implementation of more comprehensive service
  standards on DTC-eligible announcements
• Remove dependency on selected vendors by
  strengthening DTCCs manufacturing capability
• Introduce future rationalized events, fields and
  statuses as part of the re-engineering of the
  existing announcement files

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_at_Source Impact on Service Bureaus

• Service Bureaus will receive universe file from
  DTCC
• Service Bureau will be required to submit to DTCC
  a list of all non-Participants they represent and
  respective SOIs
• Service Bureau will be charged on behalf of all
  non-Participant clients
• Service Bureau must execute a legal contract
  defining use of the data

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Guiding Principles for the New DTCC Corporate
Action Announcement Event Content (A reminder)

• Single event ID for the life of the announcement
• Currently, announcement IDs are based upon
  CUSIP/Activity Code
• Elimination of DTC function codes
• Simplify the Event Types and remove processing
  references
• Provide more information on Options and Payouts
• Remove Contra CUSIPs
• Option tracking done by RRG Account

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Guiding Principles for the New DTCC Corporate
Action Announcement File Concepts

• Publish Information in 2 formats
• ISO15022
• XML
• Currently DTC publishes in propriety formats
• Publish ALL Events in a single file
• Currently DTC announces within 3 main files
  REORG, REDEM and DIVANN

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Guiding Principles for the New DTCC Corporate
Action Announcement File Concepts

• Publish Event Details in a single message
• General event information
• Option details
• Payout details
• Currently DTC provides separate messages per
  event option
• Intra-day delivery option for all announcements
• Currently end of day batch processing

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The ISO15022 MT564 (notification) will be primary
format and supplemented, as needed, with the MT568
Receipt and Delivery of XML will take a similar
path but without defined XML standards for
Corporate Actions, DTC will take a lead with our
own format.
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ISO15022 Format Data mapped where possible,
otherwise information will be published within
the Text Blocks

• The additional data will be provided in the Text
  blocks within MT564 Sequences D, E and F mapped
  to the most appropriate Sequence
• For example
• Chill On/Off Days will be found in Sequence D
  under the qualifier INCO (information Conditions)
  
• Tax information will be found in Sequence D under
  the qualifier TAXE (Taxation Conditions)
• Fractional Share Information on payouts will be
  found in Sequence E under the qualifier TXNR
  (Narrative Version)
• Additional information will flow onto the MT568
  when the MT564 10k byte limit is reached

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ISO15022 Format Data mapped where possible,
otherwise information will be published within
the Text Blocks.

• ISO15022 text blocks accommodate 10 lines of 35
  bytes (1035x) but can be expanded by using tag
  70e qualifiers, of which certain qualifiers are
  repeatable
• Additional data presented with the same name as
  XML version, for example
• Hearing Date will be shown as ltHearingDtgt or
  Chill Release Day for Deposit will be shown as
  ltChillReleaseDayForDepositgt
• A single line will consist of only 1 data element
  name/value, for example
• 70EADTX//ltHearingDtgt20060831lt/gt
• Where the data name and the value exceed 35
  characters the data will flow into the second
  line, for example
• (Line 1) 70EINCO//ltChillReleaseDayForDepo
  (Line 2) sitgt20060831lt/gt

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A side by side example of a Cash Dividend in XML
and ISO15022
XML Version
ISO15022 Version
Event Type
Record Date
Non ISO Field Placed in Tag 70E General Details
(Seq. D)
Option
Rate
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Unsupported Files in ISO Format published in XML
Function Name File Description Outbound
CSHDAL MMI Cash Settlement Dividend Allocation File Y
CSHDPJ MMI Cash Settlement Dividend Projection File Y
CSHDUN MMI Cash Settlement Dividend Unallocated File Y
CSHEUD Cash Settlement End of Day Unallocated Funds File Y
CSHPRJ Cash Settlement Projection File Y
CSHRAL MMI Cash Settlement Reorg Allocation File Y
CSHRPJ MMI Cash Settlement Reorg Projection File Y
CSHRUN MMI Cash Settlement Reorg Unallocated File Y
CSHSET End of Day Cash Settlement Y
CSHSTA thru G Hourly Slice of Cash Settlement Activity Y
CSHSTL Dividend/Reorg Cash Settlement Information Y
CSHUNL Cash Settlement Unallocated Funds File Y
RDMENT Reorg Deposit Mandatory Entitlements Y
STKPND Next Day Projected Stock Loan ash Settlement Information Y
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Questions?