Corporations actions has been hampered by the same challenges, frustrations and manual processes for years now. However, a combination of new technologies, collaboration and industry initiatives could finally give corporate actions the transformation and modernisation it deserves.
To delve deeper into the current landscape and explore potential solutions for the future of corporate actions, we spoke with Duygu Kaya, capital markets strategy director at Swift
Could you highlight some of the current challenges in corporate actions?
It won’t surprise anyone when we say there are quite a few challenges in this space, most of which are tied to how fragmented and complex the processes are in general. But there are three that are front of mind.
The first issue we see is sourcing. Corporate actions data comes from multiple different sources and the majority of them have their own formats, their own systems or even their own communication methods. This inconsistency naturally leads to data fragmentation, where reconciliation becomes a huge headache and often requires manual work and intervention. Receiving information from various sources adds to the operational complexity and creates room for errors and delays.
The second issue we see is around timing. Delay and inaccuracies in getting information out can lead to missed entitlements or even claims. So, ensuring that the information about a corporate action is both timely and accurate is crucial. With the push for shorter settlement cycles and 24/7 trading, the stakes are even higher. Everyone needs accurate, real-time communication. But we see that many systems just aren't built for that level of responsiveness, which adds further strain to the processes.
Then, finally, the third issue is the issue of communication. Just the sheer complexity of having so many players involved be it custodians, asset managers, issuers or agents, creates bottlenecks. It creates miscommunication and a lot of duplicated work for everyone that's involved. Managing these intricate processes can be resource intensive. It drives up operational costs and it also demands more robust systems to handle the workload effectively.
These challenges really highlight the need for a mix of technological innovation, standardised processes and improved collaboration among all stakeholders involved.
How much attention has been given to this sector in terms of transformation, automation and technology in recent years?
While there's been some progress with new technologies, the industry still struggles with many of the same issues it has faced for the years. Much of the effort has been piece meal addressing isolated parts of the process rather than undertaking a comprehensive and system-wide transformation.
For example, many initiatives have focused on automating specific tasks or streamlining select processes, yet the broader structural inefficiencies such as fragmentation or a lack of standardisation remain unaddressed. There was a recent study by the ValueExchange which really highlighted this issue. It showed that 75% of investors in high growth markets still rely on manual processes when they validate their corporate actions information.
This dependence on manual methods not only increases the risk of errors and delays, but it also hampers scalability as the volume and complexity of these corporate actions grow.
The lack of uniform standards and interoperable system really impairs these challenges as stakeholders continue to operate within their own silos.
That said, there are promising examples of successful transformation that we see as well. One initiative could be SGXNet in Singapore, which integrates an issuer source model for corporate actions and the feedback we've been hearing on this model has been really positive. It indicates that the model significantly improves efficiencies and STP by enabling timely and accurate dissemination of information directly from the issuers. These kind of initiatives really demonstrate that when the focus shifts towards tackling structured inefficiencies, meaningful progress is possible.
Where is the potential to transform corporate actions for the benefit of the industry?
Emerging technologies like AI and blockchain have the potential to bring significant changes.
Standardisation is another key factor. If everyone used the same formats and if their systems were able to talk to each other, it would solve many issues and eliminate much of the manual reconciliation that is slowing down the corporate action processes today. It could also lead to more seamless operations.
Collaboration is another area of potential. Issuers, custodians and asset managers all need to get on the same page to align on incentives to ensure timely and accurate data sharing. For example, issuers and agents, often act as a primary source of corporate actions data. But without their engagement, custodians and asset managers are left to fill in the gaps. Therefore, developing incentives for these players to provide high quality standardised data could be a transformative shift for the entire ecosystem.
Regulation also plays a critical role. It drives alignment as it is often the catalyst in financial industries encouraging standardisation and fostering cooperation. And if you combine these initiatives with a commitment to transparency and collaboration, you could really transform corporate actions into a driver of efficiency and trust for the industry.
What current initiatives are underway to improve the efficiency of corporate actions?
At Swift, we're actively addressing the inefficiencies. We have a corporate actions programme that we have launched last year. This initiative focuses on critical areas such as integrating corporate actions with post-trade settlement to enhance risk management, supporting regulatory requirements like the ECB’s transition to ISO 20022, and exploring how emerging technologies can resolve long-standing challenges.
One project we can mention here is Project CALM, which stands for Corporate Actions Life Cycle Management. We've been working in collaboration with Chainlink and other stakeholders in the industry, leveraging AI and blockchain in order to streamline corporate action processes, addressing issues like manual data handling and inefficiencies that's associated with it. In the first phase of phase of this POC, we have demonstrated how large language models and a decentralised network can revolutionise the corporate actions.
We used AI to extract and standardise unstructured data directly from the issuer announcement and we made this data accessible on chain. So, it reduced the manual intervention. It ensures there's real time data availability and it also represents an advancement for the industry because it's more inclusive with digital and traditional assets. Another key focus area of CALM is solving the data fragmentation. By creating an interoperable, a unified record that can flow seamlessly in between traditional and blockchain networks, we're improving both data accuracy and timelines. As we move into the next phase of the project, the plan is to expand to other stakeholders and we also would like to address more complex corporate actions events.
Our goal is to tackle inefficiencies across the entire value chain. We want to drive systemic transformation and we want to set a new standard for how corporate actions are managed.
What's your message to the wider industry regarding the future of corporate actions?
At Swift, we're really committed to leading this journey, not just as a technology provider, but as a strategic partner to the entire capital markets ecosystem. Initiatives such as Project CALM demonstrate what's possible when we come together and innovate and to address industry challenges head on. So as a call to action, we encourage everyone to please reach out and connect with us. Whether you have initiatives on your own or you have a feedback sheet to share or ideas to explore, collaboration is key and we'd love to partner with you and continue driving further progress together
This article was first publish in Global Custodian
