Solving Buy-Side Investment Managers' Corporate Actions Data Challenge
For decades, there has been significant interest in automating corporate actions processing across the buy-side community. Meanwhile, the global pandemic's impact on corporate actions has left its mark as firms faced fluctuating timelines and high processing volumes amid cancelled dividends, shifted schedules, postponed mergers and acquisitions and frequent trading halts and restrictions
Collecting corporate actions data should be trivial, but many investment managers still struggle with the process. Here, we explore solutions designed to streamline corporate actions, data collection and processing.
The rise of standardisation efforts
Organisations such as SWIFT have introduced standardised messaging for corporate action notification and election messaging to help increase efficiencies. While some investment managers use standardised messaging to collect notifications and share elections, it’s not the norm.
The majority of firms haven’t yet automated their corporate actions processing activities, primarily due to the difficulties of simply capturing, validating, establishing and reconciling corporate actions data. So what can investment managers do to increase the efficiency and integrity of their corporate actions, data collection and processing?
The pain of collecting corporate actions data
Automated corporate actions data collection solutions can help ease this pain by consolidating notifications from multiple sources into a central repository. These solutions use advanced web data extraction techniques, optical character recognition (OCR) for PDFs and integration with data providers to gather all relevant corporate actions details.
By automating this initial data ingestion step, investment managers can save significant time and resources compared to manual methods. Automated collection also reduces the risk of missing key notifications that could result in missed elections and lost entitlements. With data consolidated in one place, it becomes easier to validate, standardise and reconcile information for downstream processing.
Data validation, normalisation and reconciliation
Once an investment manager collects the corporate actions data, it needs to validate, normalise and reconcile it for processing. Validation often may include two main N-way reconciliation requirements that are only found in advanced reconciliation solutions.
The first corporate actions reconciliation requirement includes comparing the investment manager's security position with what the bank believes is eligible for the corporate action event. This typically involves a position reconciliation where the manager compares their quantity with the bank's corporate action event suitability. Investment managers want to realise the full benefit of the corporate action and can only do so by verifying eligibility and reconciling their security position.
The second necessary corporate actions reconciliation relates to the event's underlying details to ensure all banks and third-party sources agree on the next step. This process often involves reconciling corporate action notices from custodians, exchanges and third-party data providers such as NASDAQ, EDI and IHS.
Prior to submitting a corporate action for processing in their accounting or corporate actions workflow system, investment managers may want to reconcile each version of the corporate action against all known sources to promote accuracy and transparency.
Best-of-breed reconciliation solutions like Clareti and Electra Reconciliation make comparing two or more sources a breeze. By detecting issues early with any individual source, they greatly reduce the probability of missing a deadline date or acting on inaccurate information.
Upon completing the reconciliation tasks, the investment manager needs to upload the corporate actions to its internal systems for processing. Most systems that accept electronic corporate actions data will require the data to be sent in a specific file format and layout. Data transformation and mapping tools can help ensure data is delivered in the proper format.
Enhancing the quality and speed of corporate actions data
Corporate actions processing is risky and small mistakes can have long-lasting effects on a buy-side firm's reputation and bottom line. Investment managers who invest in solutions and services that automate and manage the collection, validation, normalisation and reconciliation of corporate actions data are better positioned than those relying on error-prone, manual processing.
By automating corporate actions data intake from multiple sources, organisations benefit from:
- Time and cost savings from eliminating manual effort
- Reduced risk of missed notifications and elections
- Improved data quality through validation and reconciliation
- Faster processing times by streamlining workflows
- Better transparency and audit trails
Investing in robust data management capabilities is critical for buy-side firms looking to enhance operational efficiency while mitigating risks around corporate actions processing. With the right technology solutions in place, investment managers can drive down costs, minimise manual touchpoints and focus resources on higher value activities.
Summary: Solving buy-side investment managers’ corporate actions data challenges
If you are looking for a better way to increase the quality and speed of your corporate actions data, please contact us to schedule a conversation. Our team of experts can assess your current workflows and recommend tailored solutions to optimise your firm's corporate actions processing capabilities.
