The Depository Trust & Clearing Corporation has expanded its Global Corporate Actions Validation Service coverage to include listed equity derivatives.
Historically, financial services firms had to use manual processes to locate and adjust derivatives contracts to account for the effects of corporate actions (such as stock splits, mergers, special dividends, etc.) on the underlying security.
Every time a corporate action occurs on an underlying equity, each exchange with a listed derivative on that equity issue publishes a notice to members detailing the required adjustment method, adjustment factor, lot size change and strike price change for the derivatives contract.
Now, GCA VS will aggregate this information and deliver it to any interested customer firm through an electronic central information hub in a standardisd format, saving firms time and effort and reducing exposure risk.
The service will initially publish information from five main global exchanges and infrastructure organisations for equity derivatives – the Options Clearing Corporation, NYSE Euronext, Eurex, Borsa Italiana and the Tokyo Exchange – and will continue to add other exchanges as the service develops.
“As trading in equity derivatives has grown, customer firms reached out to DTCC last year to see if we could publish through GCA VS details on the impact of corporate actions on listed derivatives,” says Patrick Kirby, managing director, DTCC asset services. “We are delighted to be able to respond to our clients with this new addition to our validation service, so our client firms no longer have to trawl through various exchanges’ website to find these updates and re-key them into their systems themselves.”
In 2009, GCA VS handled more than 990,000 corporate actions announcements and issued more than 5.9 million announcements on scheduled payments for fixed income securities.
Earlier this year, DTCC added coverage of structured securities handled by the US Federal Reserve Bank (mostly securities created by Fannie Mae and Freddie Mac) to GCA VS, along with scheduled payments for global fixed income securities.
DTCC has also been spearheading an effort along with XBRL US and Swift to promote straight through processing in corporate actions by electronically capturing data directly from the issuers in a standardised form when a corporate action is first announced.