By Ann Marie Bria, Managing Director, General Manager of Asset Services, DTCC
As the global financial markets continue to evolve and scale, the asset services industry is at a critical point where it must transform processes and technologies to successfully meet the growing needs of clients, regulators and counterparties. Today, asset servicing is performed by virtually all market participant firms, however, inefficiencies lie in legacy systems and manual, non-standardized processes across the asset life cycle, creating increased costs and risks. To address these challenges, firms must place a renewed focus on upgrading technology as well as modernizing processes to achieve more efficient, data-driven and resilient systems.
But, where to focus? The biggest opportunity in asset servicing right now is around corporate actions event announcements, a critical processing area filled with friction and fragmentation spanning data collection delays to information discrepancies. To drive improvements in corporate actions and address market demands, firms must modernize and evolve their methodology to embrace a direct-sourcing model that allows for the retrieval of critical event data leveraging standardization. DTC has already begun engaging with the industry to further innovate this critical part of the securities lifecycle by leveraging technology and redefining processes to enhance efficiency and accuracy.
Leveraging direct-sourcing models
Currently, the asset services industry is challenged by a lack of automation as well as redundant methodology to capture and manage corporate action announcements, relying on existing data validation models to compare disparate feeds that can introduce data discrepancies. A recent survey conducted by Value Exchange revealed that a single corporate action event involves numerous stakeholders, however, if a real-time, standardized platform is adopted to form a connected ecosystem, the industry could potentially save USD 15 billion annually.
To address these operational challenges and promote streamlined processes to capture reliable source data, DTC is actively working to digitize the securities lifecycle of the 1.4M eligible securities held at DTC by introducing a direct sourcing model for Corporate Action announcements. By capturing event data in a standardized way through issuers, agents and other responsible third parties, firms receiving this information can restructure how lifecycle events are processed. The result? Near real-time decision-making capabilities across asset managers and their clients. When investors engage directly with source event announcements from issuers and agents they benefit from more accurate and timely data, improved automation, lower risks and greater operational efficiency.
Benefiting from new technologies
As the asset servicing industry explores new ways to automate and improve their offerings, one of the most compelling developments across the industry is the widespread adoption of digital technologies like Artificial Intelligence (AI) and Machine Learning. These technologies are already playing a pivotal role in reshaping financial services and are positioned to be key enablers across the asset servicing space.
AI has the capabilities to redesign how information is captured and shared across corporate actions announcements. For example, when a bond is going to be called prior to maturity, there is documentation created by issuers and agents that is sent out to bondholders. This documentation contains critical data points that are needed to understand how this corporate action is going to impact the bond and its bondholders. The process today involves documents being sent via email, requiring manual data entry into systems.
Leveraging technologies, like AI, can reduce manual processes by automating data extraction and entry from documents to create these events, and overall improve how corporate actions announcements are managed. AI is also suitable for detecting anomalies, inconsistencies and inaccuracies within announcements, further enforcing the need for a standardized platform to automate how information is delivered. By implementing innovative solutions, firms can proactively address pain points by uncovering new insights and tailoring personalized offerings, enabling more advanced decision making.
Moving the Market Forward
DTCC is propelling this change by introducing a new standardized, direct sourcing platform for processing redemptions that will streamline corporate actions processes, benefiting agents by providing visibility into their securities, upcoming events and required actions while establishing a robust solution for market participants to access reliable information, enhance collaboration and improve the dissemination of corporate action announcements. Additionally, the development of a modernized platform will improve transparency and communication between agents and DTC by moving away from manual interactions that drain resources and introduce risks.
The asset servicing industry is at a crossroads, where volumes and non-automated processing are impacting operational efficiency and growing risk. Yet, automated technology and capabilities are poised to revolutionize this critical area of financial services. Together, the industry can build a more efficient, transparent and client-centric framework that powers its continued growth by embracing transformative technologies and new market infrastructure capabilities. This transformation is not just about adapting to the immediate needs of the industry- it’s about moving the entire market forward.
