SMPG – European Commission Discussion about uniqueness of corporate actions event reference Brussels, 24 April 2009 Bernard Lenelle, Co-chair Corporate Actions SMPG
Agenda of the presentation 1. Background on the SMPG 2. SMPG structure 3. Unique CA Event reference – background of the issue 4. Initial Problem Solving 5. Current Problem Solving Process 6. In what respect could the European Commission help? Bernard Lenelle Page 2 2 December 2005 SMPG – European Commission COAF discussion
1. Background on the SMPG • SMPG created by SWIFT in 1998 • Now divided in 3 streams: – Settlement and Reconciliation, –Corporate Actions, and –Investment Funds Standardise and Provide guidance • Main tasks are to: document market and clear practices recommendations Consolidate NMPG feedback and ensure compliance Bernard Lenelle Page 3 2 December 2005 SMPG – European Commission COAF discussion
2. SMPG structure Global SMPG S&R Working Funds S&R CA Group Market Market Institutions National Market Practice Institutions Groups (NMPGs) SMPG recommendations arise from the constant interaction between SMPG and different NMPGs. Bernard Lenelle Page 4 2 December 2005 SMPG – European Commission COAF discussion
3. Unique CA Event reference – background of the issue At the origin, Investment Managers have raised concerned about the fact that the same event was announced with different references depending on the provider Custodian A CORP A Market Market Custodian B Issuer Fund Manager CORP B CORP C Custodian C > Discussion started within SMPG to try to find a solution Bernard Lenelle Page 5 2 December 2005 SMPG – European Commission COAF discussion
4. Initial Problem Solving Process… Issue was tackled by the SMPG from different angles: 1. Work on a common algorithm: E.g. :20C::CORP//11!c4!n1!n where: – 12!c is the 12 characters of the underlying ISIN. – 2!n is the country code of the market place announcing the event (as for the same ISIN, there may be different event characteristics or scenarios based on the place where the instrument is listed). Note: If the need for MIC is required, the proposal would accommodate it. – 2!n is a number count of the events having taken place on the instrument since the beginning of the year, including competing offers on the same instrument. This number could be maintained as an element of the securities master database. Bernard Lenelle Page 6 2 December 2005 SMPG – European Commission COAF discussion
4. Initial Problem Solving Process Issue was tackled by the SMPG from different angles: 2. Allow for a new optional element in the standards (COAF). Obj: distinguish between internal reference for processing and official reference NB: Initially optional element is implemented 3. Generate the code centrally E.g.: SWIFT could have centralised the creation > hardly feasible Bernard Lenelle Page 7 2 December 2005 SMPG – European Commission COAF discussion
5. Current Problem Solving Process Only 2 viable options are left from SMPG perspective • Identify a central body market by market > This has started from SMPG initiative but bears the main disadvantage that in some markets the situation is not clear- cut: CSD or Stock exchange? (e.g. Spain, Austria) • Mandate the issuers or their agents to issue the reference > This has always been the preferred solution but more long-term. It was not yet considered by the SMPG because the main pre-requisite was the support from legal authorities Bernard Lenelle Page 8 2 December 2005 SMPG – European Commission COAF discussion
6. In what respect could the European Commission help? Open discussion Bernard Lenelle Page 9 2 December 2005 SMPG – European Commission COAF discussion
BACK UP SLIDES Bernard Lenelle Page 10 2 December 2005 SMPG – European Commission COAF discussion
3. SMPG core solutions – Standardise… E.g. representation at the last SMPG meeting in Representation Madrid: 22 markets in CA and Settlement; 12 markets in Investment Funds Efforts to streamline processes across markets Alignment Decision Decisions are taken in every meeting (consensus or vote) resulting in common recommendations making Cooperation E.g. Strong cooperation with data vendors on corporate action side. Objective: end-to-end consistence The goal: standardise market practices and formats. Bernard Lenelle Page 11 2 December 2005 SMPG – European Commission COAF discussion
3. SMPG core solutions – … & Document n Global Market Practice official documents Global Doc. n Other global documents in parallel In both CA and IF, samples have been produced in Samples order to help implementation of the recommendations Market E.g.: for CA, 11 markets have provided a Market Practice Document in line with global recommendations Specifics E.g.: for CA, Event Interpretation Grid (EIG); Complex Grids Events Grid; MT567 Matrix Visit WWW.SMPG.INFO and get the info! Bernard Lenelle Page 12 2 December 2005 SMPG – European Commission COAF discussion
Current solution for Semi-centralised reference creation • The home market for each security should assign the official references for events involving each home market security. • To avoid assignment of duplicate numbers globally, the ‘Official Corporate Action Event Reference’ should contain a 2-character alphanumeric code unique to the official body assigning the number as the first 2 positions of the reference. The 2-character ISO country code should not be used for this purpose as more than one official body can exist for a market. • The Latin character set (0-9 and Latin uppercase (A-Z)) should be used for this 2-character code. • SMPG will vet the use of the 2-character codes for uniqueness. Bernard Lenelle Page 13 2 December 2005 SMPG – European Commission COAF discussion
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