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Corporate Action Automation

Philippe
pp Chambadal
SmartStream Technologies - CEO

SmartStream at a glance
18 global offices, with development facilities located in the UK, Europe
and India
Leading software vendor focused on middle & back office operations
Successfully expanding its offering to capture an increasing portion of
the post-trade processing value chain, upstream and downstream of
reconciliations
Solutions and services to generate improved operational efficiency
and ROI
Serving 1,500 customers globally, including:
70 of the worlds top 100 banks
7 out of the 10 largest asset managers
8 out of the 10 largest global custodians

The Market Drivers


Focused on reducing operational risk and cost through automation
Delivering software solutions and powering utilities that address
strategic requirements
Growth in trading complex financial products (especially derivatives)
Increasing volumes, trade exceptions and failures
Driving down the cost of transaction processing through utilities
Managing regulatory pressures e.g. Basel III, Dodd-Frank
Replacing manually intensive tasks
Supplementing weak/legacy infrastructure
Improving operational transparency and customer service

Customer focus has always enabled SmartStream to


lead innovation
SmartStreams solutions cover the entire post-trade lifecycle, enabling customers to manage the process
through a common architecture
Overview of solutions

Reconciliations:
R
ili ti
real-time
l ti
reconciliation
ili ti with
ith automated
t
t d repair
i off
trade exceptions and failures caused by incorrect data, manual errors
or inconsistencies between systems and counterparties. This solution
is available on-premise, on-demand and as a Business Process
Outsourcing (BPO) service
Cash & Liquidity
q
y Management
g
(CLM):
(
) automated g
global, realtime management of all money movements, cash and liquidity
positions
Trade Process Management (TPM): co-ordinates and controls
the allocation, confirmation, clearing and settlement process whilst
applying a rich exceptions management capability

Corporate Actions: delivers a streamlined and automated approach


to complete, timely and accurate event processing

Central Reference Data Utility (RDU): provides a single and


externalised approach to data management, delivering automatic
cleansing of vendor and exchange data required to execute trades
from front- to back-office

Fees & Invoicing: provides an automated service for managing


brokerage fees and invoicing for banks, brokers and inter-dealerbrokers

TLM OnDemand (Software as a Service (SaaS) model): enables


customers to access a hosted version of the reconciliation solution
through a web browser user interface

Unrivalled value proposition for customers

S
SmartStream
tSt
is
i the
th only
l vendor
d with
ith the
th ability
bilit tto lilink
k reference
f
d
data
t
management to reconciliations to further increase its customers STP
rates

central RDU aimed at proactively preventing broken trades

The adoption of SmartStreams solutions allow users to realise


market-leading
g match rates in excess of 95%,, compared
p
to the
industry average of 84%1
Note:
1.

Tower Group

Flexible delivery to meet customer needs


Managed service

Aspire

On-demand
On demand

On-premise
On premise

Treasury
Confirmations
TPM

Reference Data
Utility
Fees &
Invoicing
Utility

Trade
CLM
Reconciliation Finance
Exception &
s
Investigation
Corporate
Actions
Client
Money

SmartStreams industry-changing Utility services


Financial institutions cannot address all processing inefficiencies by automation in isolation from their trading
partners. Industry utilities are becoming a requirement. Utilities that enable the adoption of a single common
process, underpinned by a single data model, fuelled with a single data set will eventually become industry
standard
SmartStreams Utility services

Linking reference data and post-trade processing

Market complexity and the need to reduce costs are driving the need for shared,
standardised delivery of post-trade processing functions

Clean data into


reconciliations

Reference Data Utility

Through the RDU, SmartStream is providing the first shared common source of
reference data to financial institutions worldwide, minimising trade breaks arising
from compatibility issues between customers

Fees & Invoicing

Matching
&&
Matching
Cleansing
Cleansing

Update data

A new collaborative Utility service to expedite the fees and invoicing process
between banks, brokers and inter-dealer brokers (IDB). The service is currently
being piloted for both OTC and exchange-traded instruments across all asset
classes

TLM OnDemand (SaaS model)

Beyond its SaaS on-demand offering, SmartStream has partnered to create the
industrys
industry
s first BPO service for reconciliations
reconciliations. The Aspire service provides the
hardware, software and staff to deliver a completely outsourced reconciliations
operation

Data
Anomalies
Data
Anomalies

Public
Public
data
data
Research
&
Data
Analysis

Auto match fix and


update

Manual fix
update

Provides
P
id a scalable
l bl approach
h to
t automating
t
ti reconciliations
ili ti
where
h
customers
t
are
rapidly on-boarded to a delivery model that adapts to their processing
requirements at a lower Total Cost of Ownership (TCO) than they could
achieve with an on-premise application
Aspire

Exception
raised

Trade exceptions and failures are reduced as participants use


shared reference data to:

reduce cost of middle- and back-office operations

improve service for customers (hedge fund and asset


managers)

reduce associated market and operational risks

Continuous feedback loop will guarantee ongoing quality


improvements for all customers

Large, diversified and blue-chip customer base

Overview of the customer base

SmartStream is focused on serving financial institutions and currently has over 1,500 customers across the globe

The Companys customers are principally banks and other financial institutions, including more than 70 of the worlds 100 largest
banks, the top 10 largest asset managers and the top 10 largest custodians

Key clients by segment


Banks and
Brokers

Asset Managers
and Hedge
Funds
Custodians,
Fund
Administration
and Clearing
Houses
Corporates and
Insurance

Comprehensive post-trade lifecycle management solutions


Proven ability to apply STP to reduce risks and costs

Overview of key solutions

Reduces
operational
risk

Reduces
regulatory
risk

Reduces
financial
risk

Reduces
reputational
risk

Reduces
operational
cost

Increases
revenue

Reconciliations: real-time reconciliation with automated repair of


trade exceptions and failures caused by incorrect data, manual
errors or inconsistencies between systems and counterparties. This
solution is available on-premise, on-demand and as a BPO service

CLM: automated
CLM
t
t d gl
global,
b l real-time
l ti
management
g
t off all
ll money
movements, cash and liquidity positions
TPM: co-ordinates and controls the allocation, confirmation,
clearing and settlement process whilst applying a rich exceptions
management capability
Corporate Actions processing: delivers a streamlined and
automated approach to complete, timely and accurate
event processing
Centralised RDU: provides a single and externalised approach to
data management,
management delivering automatic cleansing of vendor and
exchange data required to execute trades from front to back-office

Fees & Invoicing Utility: the electronic management of invoices


between provider and customer
Trade Finance: automation of manual and paper-based trade
finance activities

The reality of automating Corporate Actions

"The Challenges and Opportunities of Automating


Corporate Actions Processing."
Financial institutions are facing a unique challenge; they are expected to reduce
operational risk while reducing operation costs, all at a time when many industry experts
expect a swell of activity in Corporate Actions activity due to many factors. The automating
of corporate action processing has many advantages; it enables an operations team to
greatly reduce risk whilst being much less susceptible to processing volume peaks.
Additionally, with the removal of repetitive, manual tasks and the attainment of STP,
where achievable, corporate action staff is freed up to concentrate on adding value to the
service they provide and spend their time focusing on complex voluntary events, where
the greatest risk truly lies.

Corporate Actions why automate?


Corporate actions is consistently regarded as the MOST risk intensive and manual
component of back and middle office processing, regardless of the financial institution type.
Corporate Actions automation projects are still being driven by the need to:
Significantly reduce operating costs
Remove manual processing around mandatory and less complex
voluntary events
Focus on exception management
Asset
Managers
Hedge
Funds

Broker/
Dealers

Custodians

Facilitate seamless integration with external systems, and


automated messaging
Significantly
Si ifi
tl mitigate
iti t the
th risk
i k off loss
l
Ensure event data is accurate and complete

Stock Exchange

Manage elections process, including multiple custodian


deadlines, via an integrated diary
Significantly improve customer service
Improve time to market of event information

Maximise event deadlines


Enhance arbitrage trading opportunities

Where are these drivers represented in the event lifecycle?

Corporate Actions Diary

Custodians

1
Vendors

Reputation

Custodians

Risk

Client
Notifications

1
3

O
Operating
ti C
Costs
t
4

Custodians

Data Cleansing

Instruction

Election Capture

Clients

Entitlement
Calculation

5
Position Reconciliation

A
Account
t Posting
P ti

Back
Office

6
R
Reputation
i

Users

Back
Office

Corporate Actions Processing


The
Current
Situation

Many financial institutions still process corporate actions manually


Lack of a single, scalable automated event management process
Legacy systems are expensive to maintain, inflexible and
cannot scale
Paper based files create inefficiency and are prone to
being misplaced
The use of Excel for diary entries, entitlement calculation and
reconciliation is clumsy and is not a justifiable long term solution
Manually driven client notifications are time consuming,
consuming especially
where bespoke formats are required for each client
Manual processing of SWIFT, paper, email, fax, letter and phone
elections are unmanageable in a growth environment
The lack of reconciliation throughout the event lifecycle can
generate unnecessary exceptions and claims processing
Manual processing of entitlements is not maintainable during
unexpected
d peaks
k

Corporate Actions Processing


The
Opportunity

Mitigate the risk of loss due to missing an event/election,


mis-interpreting event details or not processing an election
Automate the entire lifecycle of a corporate action
action,
in particular data capture and entitlement calculation
Use the latest standards such as ISO15022 to communicate
Focus on exception management processes to mitigate risk
Enable full STP of multiple data feeds, elections and
entitlement posting
Decrease opportunity costs of election decisions by maximising the
decision period
Mitigate the risk of loss due to missing an event/election,
mis-interpreting event details or not processing an election
Solution to manage multiple global processing hubs
Enhanced measurement and reporting from a single database of all
corporate actions

Manage custodian / data vendors SLAs

Automated Processing Available Today


The
Facts

Operating Costs

Reduced

Risk

Reduced

Customer Service

Improved

Data capture and cleansing of event information

Information can be received in electronic format and rationalised with all


other available sources

Maturing Industry Standards continue to drive and facilitate automation

Transform a paper based, manually intensive process into a task based


exception management process

Operating Costs
Reduced through the reduction of manual intervention and the
transformation of the process to exception management

Risk
Reduced, automated event creation eliminates the risk of missing
events

Customer Service
Improved through the freeing up of corporate action professionals
time

Automated Processing Available Today


The
Facts

Operating Costs

Reduced

Risk

Reduced

Customer Service

Improved

Diary population and event management

Automate the recording of event critical dates, milestones and date


driven actions

Operating Costs
Reduced through the elimination of manual overhead of recording
and updating these dates

Risk
Reduced through the automated task and alert creation. Eliminates
the risk of missing key dates and deadlines
deadlines.

Customer Service
Improved through the freeing up of corporate action professionals
time and increased efficiencies

Automated Processing Available Today


The
Facts

Operating Costs

Reduced

Risk

Reduced

Customer Service

Improved

Position capture and stock record reconciliation

Event level position management and reconciliation can be centralised

Early warning alerts can help to resolve potential problems before they
escalate

Operating Costs
Reduced through the centralisation of all eligible balances and
transactions against the event master record

Risk
Reduced through the early resolution of reconciliation breaks

Customer Service
Improved through the enhanced messaging as clients buy into or
sell out of the stock affected by the corporate action

Automated Processing Available Today


The
Facts

Operating Costs

Reduced

Risk

Reduced

Customer Service

Improved

Communication

Standard email, fax and letter templates can be adopted to impart any
information anytime
y

SWIFT, ISO, XML messages can be created to distribute information


throughout the event lifecycle

Operating Costs
Reduced through the elimination of manual processing

Risk
Reduced, clients will be informed instantly as soon as event
information is received or updated

Customer Service
Levels are improved through the automated communication
triggers
Enhanced features such as related holdings can be included on
event broadcasts
Early
E l notification
tifi ti off eventt ffacilitates
ilit t arbitrage
bit
ttrading
di

Automated Processing Available Today


The
Facts

Operating Costs

Reduced

Risk

Reduced

Customer Service

Improved

Election management

Election instruction can be automated via SWIFT messaging, using


standing instructions, online by the client using self service web portals
or by
b end
d users di
directly
tl through
th
h th
the UI

Extended decision windows

Automated custodian elections and deposit state management

Operating Costs
Reduced through the reduction of manual processing

Risk
Reduced via automated alerting where client elections are
outstanding
Automated reminders and chasers
Application of Standing Instruction

Customer Service
Levels are improved through extended deadlines
Enhanced messaging and confirmations though automated
communication triggers

Automated Processing Available Today


The
Facts

Operating Costs

Reduced

Risk

Reduced

Customer Service

Improved

Entitlement calculation & posting

Auto generation of Entitlement Transactions


Stock & Cash movements
Charges & Fees
Withholding Tax & Treaty reductions
Claims

Operating Costs
g the reduction of manual p
processing
g
Reduced through

Risk
Eliminated via automated processing of entitlements

Customer Service
Enhanced with automated confirmation advices

Automated Processing Available Today


The
Facts

Operating Costs

Reduced

Risk

Reduced

Customer Service

Improved

Reporting

Measure & Manage

Single corporate action depository enables the generation of multiple


MIS reports
Metrics of seasonal volumes, key performers
Manage custodian and data vendor SLAs

Operating Costs
Reduced through the identification of poor performance

Risk
Reduced via trend analysis

Customer Service
Enhanced with increased information

Market Size & Growth

Market Size & Growth

Growth is predicted to be
largely driven by increased
spending on automation
software

WHY?

New Data Standards

DTCC leadership

XBRL Initiatives

SEC Enforcement

Market Size & Growth

Standardisation of the
Corporate Actions format in
North America and Asia
Pacific brought on by regularity
reform
f
should lead to spending
growth starting in 2012.

Firms Investing in Corporate Actions Processing

A majority of firms plan


to invest in corporate
actions improvements
in the next two years

Automating the
corporate actions
workflow reduces
direct costs from
processing failures and
provides indirect
benefits to the frontoffice.

Specifically,
automating the
corporate actions
process provides
investment managers
with a richer
information window to
analyse data,
improving individual
productivity.

Real life stories:


Clients that have automated their Corporate
p
Action p
processing
g with SmartStreams
TLM Corporate Actions

Preservation or improvement of reputation


The actual or perceived quality and timeliness of corporate actions processing can
have a huge impact on a firms reputation.

Inaccurate, inefficient event notifications and elections processing was the key
driver behind the project for a major investment bank.
Front office staff did not have access to accurate start of day cash and stock positions,
positions
and consequently experience a high rate of failed trades.

Custody operation consistently failed to win new business and lost existing clients,
clients
due to the lack of an automated corporate actions system.
Largest custody client, ceased using outsourced corporate actions service and brought it
in house using TLM Corporate Actions.

Trends, Themes and Competitive Advantage


Risk Mitigation Remains the Key

Corporate Actions is all about reducing the risk

It does not make the press but there are still big losses against Corporate Action processing
Leading financial institutions have dropped appx 20mm over the last couple of years

Capital adequacy rules

Enhanced service level


ROI and FTE reduction
Turning Corporate Actions into a profit-generation or profit-optimisation tool has started to
become a theme

Investment Banks benefit here, whereby injection of timely CoAc data into the trading arms of the
organisation is perceived as a competitive advantage

Hedge Funds where they deliver event notifications with details of Related Holdings to the trading
desks to ensure all event impacts & investment opportunities are researched

Metrics and Reporting

Measure to manage

Why Automate A real life story:

SmartStream
Data Management Services

SmartStream Data Management Services


SmartStream
Data
Management
Services

Business Unit of SmartStream Technologies, the leading software vendor focused on middle & back offices
operations

Data Management Services, based on our Universal Data Model, that provides high quality, consistent reference
data, pricing, corporate actions and indices services across all data types

Operations staff in Santa Clara, Bristol and Mumbai

Focused on improving quality and reducing costs of delivering consistent reference

Powering utility -like services leveraging shared people, content , IT infrastructure and processes

What we do

Services
Available

Target Clients

driving down the cost of transaction processing through utilities

improve quality of reference data to meet clients compliance and new regulatory requirements

scalable solution, using consistent business rules across all data type

flexibility to provide various delivery mechanisms, protocols and formats clients required

subscription service allowing clients to pay only for the data they need, when they need it

minimize the time it takes p


process new data feeds and sources to 2-4 weeks

Reference Data Management Services and Symbology Cross Reference

Pricing Data Management and End of day Pricing History

Corporate Actions Event Cleansing

Financial Data Dictionary

Global Market Calendar Service

Indices and ETF Data Management and History

Legal Entities and Hierarchies

Investment Banks/Primary Dealers

Asset Managers/Hedge Funds

Custodians

Exchanges

Corporations

Service Model

Data Quality, Scalability, Efficiencies

Single relational data model combining:


Securities data
SSIs
tit d
t
L
Legall entity
data
Corporate actions
Roles

Works with any clients proprietary or existing third party


technologies
Handles any data vendor feeds
5-tier Quality Control Processes
Exception Management

Inherent in computing platform


Helpdesk and Monitoring technologies

Operating Model

Vendor Mgmt
g

SLA

Customer Services

Capture Client Feedbacks

Acquisition

Operations
p
Mgmt
g

Process Innovation Processing


g Agent
g

Root Cause Analysis Quality Control

Reconciliation

Enrichment

Client Adaptation

Distribution

Services and Integration areas addressed


From customized services to niche services to providing enterprise wide data management
services, we will cater to your requirements:
Reference

Data Management

Equities, Equity Derivatives, Fixed Income


Index Re-Computation constituent identifiers, price, shares and weighting of the
individual constituents and intraday corporate actions
ETF family composition; ETF constituent identifiers, price, shares and weighting
of the individual constituents in the ETF, ETF history
Granular

Corporate Actions scrubbing

Symbology
Financial
Global
G

Cross Referencing

Data Dictionary

Market Calendar
C

What does SmartStream Reference Data Services deliver?


Clean reference data files
Eliminating the need for expensive resources dedicated to maintaining custom data loaders
to extract
extract, transform and load data from vendor files
SmartStream Utilities acts as your agent, providing custom data services to
Sourcing data from exchanges, vendors, end users etc.
Aggregate, normalise, cleanse using proprietary Universal Data Model (UDM)
Produce customised data feeds
Driven by business rules, custom data files are constructed to the clients specification
Files/messages populate a centralised Security Master File (SMF)
Files are generated for: accounting, compliance performance measurement, reporting,
billing, order generating systems, trading and portfolio management
Each file is uniquely created for the specialised needs each systems
SmartStream runs quality controls and manages the exceptions, minimising resourcing
requirements

The Data Process


Acquisition

Enrichment

Validation

Manage receipt or
acquisition of data
sources

Categorise and
catalog data

Manage changes to
data formats

Rules based
reconciliation

Parse, interrogate
and normalise data

Raise exceptions
and notifications of
incomplete or
inaccurate data

Measure
consistency,
conformity and
competences
Measure and
manage service
levels

Vendor Level Quality


Control
Completeness
Format/Structure
Timeliness

Identify data
completeness and
supplement where
needed

Measure and store


data quality for
service level
management

Asset Type Level


Quality Control
Mandatory Fields
Business Rules
Corporate Actions
Applications
4-eyes
Client Rules

Distribution

Notify data
management team
of process, results
and vendor issues
Measure
effectiveness of
vendor data and
enrichment

Fields Level
Quality Control
Intra-Vendors
Recon
Business Rules
Corporate Actions
Applications
4-eyes
Clients Rules

Rules-based
composition
Support for delivery
mechanisms
Support for delivery
protocols and
formats
Measure and store
metrics for delivery
incl timings
incl.
timings, quantity
and composition

Data
Supplementation
Manual
Interventions
Data Extractions
from original
sources
Business
B i
R
Rules
l
4-eyes

Clients Specifications

Business Rules
Distribution Rules
4-eyes
Client Rules

SmartStream Corporate Action Services


Cleanse data at the inception of the event announcement to facilitate and expedite the
next sequential stages of the event lifecycle thus improving quality, reducing operating
costs and increase STP rate

Capture Announcement
Market level event data

Golden Record creation


Normalize, cleanse & enrich data
Early notification of validated event master record

Combining vendor, custodian and exchange feeds into a single cleansed data feed
delivered in any format
Use proprietary 5-tier Quality Control Processes to cleanse, refine, and enhance data
quality that is under-pined by measure and tangible SLAs

Because
Because the data matches between data sources do not mean the data is correct 2 bad data does
not equal good quality

SmartStream Corporate Action Services

Event Announcement

Ex Date

Instruction Deadline Date

Record Date

Pay Date

----

----

----

----

----

Corporate Action Event Lifecycle

Capture
p
Announcement
Market level event
data
Golden Record creation
Normalize,
o a e,
cleanse & enrich
data
Early notification
of validated event
master record

Required fields are constantly


monitored/researched with exchange
website and issuer until completeness
Mandatory and Important Fields Data
Cleansing Matrix based on corporate
action types
Exceptions Management
Logical/Relational Relationship of fields
Threshold Calculation
Trends and patterns Algorithm
Holiday/Weekend/Business Day Rules

SmartStream Corporate Actions Services


1.

2
2.

3.

Vendor Level Quality Control:

All Corporate Actions are collected as they are announced

File validity verification (format, structure, etc.)

Monitor vendor performance against pre-defined service level agreement

Manage receipt or acquisition of vendor and proprietary data sources

Measure consistency, conformity and completeness of data

Asset/Corporate Action Type Level Quality Control

Data Enrichment for missing values

Determines the accuracy and completeness according to MDS and client-defined business rules

Fields Level Quality Control

4.

Business Rules, Logical Verification, Threshold Calculation, Fields relational Validation, Holiday Rules, Weekend Rules,
Business Day, 4-eyes principle, Data Overwrite and Locking, Delta verifications

Data Supplementation

Manual Interventions/ Exceptions Management,


Management Exchange Websites Management,
Management Monitoring of Corporate Action
Announcements and/or corrections, Data extraction via screen scrapping, Data down load via pdf or flat file, Logical
attributes relationship, Market Specifications , Pattern Extrapolation/Extension

5. Clients Specifications

File Distribution Rules , Client Profile/Subscription,


Profile/Subscription Proprietary Business Rules

SmartStream Corporate Actions Services


Feed Information

Any vendor feed supported regardless of format

Any custodian feed supported regardless of format

Client specific Securities


Securities of Interest
Interest file uploaded

ISO 15022 and 20022 supported

XBRL supported

Capability to store issue conditions, cash flows (distribution, redemption), mergers, acquisitions, legal
proceedings,
di
liliquidation/sale,
id ti / l capital
it l change
h

Service Information

Automated data loading

Data cleansing
g and completeness
p
checking
g leading
g to event creation

Exception Management workflows determine exceptions for resolution

Cleansed data feed output in any format, at any frequency

GUI or data feed output option

Message Information

All standard ISO event types supported, additional non-standard event types supported

All Mandatory and Voluntary event data provided

g all dates,, terms and options


p
are normalized
Core,, cleansed event information including

Industry Direction & Initiatives


On premise vs. Cloud-based
ISO20022 & XBRL

Move to XML based and tagged messaging is gathering momentum

XML based ISO 20022 messaging is the way forward but with so many institutions just completing
ISO 15022 projects the speed of adoption will be interesting

Value Add services:

Class Actions and Tax Reclaim processing as a service

OCR processing

Corporate Actions Automation The real questions


How much capital do you put aside to offset risk of processing corporate actions
How do you manage season peaks in processing volumes
Do you know what your current of future exposure is to corporate action losses
Attrition rate of quality, experienced corporate action staff

Questions?

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