Corporate Action AutomationCorporate Action AutomationPhilippe Chambadalpp
SmartStream Technologies - CEO
SmartStream at a glance
18 global offices, with development facilities located in the UK, Europe and India
Leading software vendor focused on middle & back office operations
Successfully expanding its offering to capture an increasing portion of the post-trade processing value chain, upstream and downstream of reconciliations
Solutions and services to generate improved operational efficiency and ROI
Serving 1,500 customers globally, including:
70 of the worlds top 100 banks
7 out of the 10 largest asset managers
8 out of the 10 largest global custodians
The Market Drivers
Focused on reducing operational risk and cost through automation
Delivering software solutions and powering utilities that address strategic requirements
Growth in trading complex financial products (especially derivatives)
Increasing volumes, trade exceptions and failures
Driving down the cost of transaction processing through utilities
Managing regulatory pressures e.g. Basel III, Dodd-Frank…
Replacing manually intensive tasks
Supplementing weak/legacy infrastructure
Improving operational transparency and customer service
Customer focus has always enabled SmartStream tolead innovation
Unrivalled value proposition for customers S tSt i th l d ith th bilit t li k f d t
SmartStream’s solutions cover the entire post-trade lifecycle, enabling customers to manage the process through a common architecture
Overview of solutions R ili ti l ti ili ti ith t t d i f SmartStream is the only vendor with the ability to link reference data
management to reconciliations to further increase its customers’ STP rates
central RDU aimed at proactively preventing broken trades
The adoption of SmartStream’s solutions allow users to realisemarket-leading match rates in excess of 95%, compared to the
Reconciliations: real-time reconciliation with automated repair of trade exceptions and failures caused by incorrect data, manual errors or inconsistencies between systems and counterparties. This solution is available on-premise, on-demand and as a Business Process Outsourcing (“BPO”) service
Cash & Liquidity Management (“CLM”): automated global, real- g , pindustry average of 84%1
q y g ( ) gtime management of all money movements, cash and liquidity positions
Trade Process Management (“TPM”): co-ordinates and controls the allocation, confirmation, clearing and settlement process whilst applying a rich exceptions management capability
Note:1. Tower Group
Flexible delivery to meet customer needsManaged service On-premiseOn-demand
Corporate Actions: delivers a streamlined and automated approach to complete, timely and accurate event processing
Central Reference Data Utility (“RDU”): provides a single and externalised approach to data management, delivering automatic cleansing of vendor and exchange data required to execute trades from front- to back-office
Managed service On premiseOn demand
Treasury Confirmations
TPM
Aspire
from front- to back-office
Fees & Invoicing: provides an automated service for managing brokerage fees and invoicing for banks, brokers and inter-dealer-brokers
TLM OnDemand (Software as a Service (“SaaS”) model): enables customers to access a hosted version of the reconciliation solution
CLM
TPMTrade Finance
Exception & Investigation
Reference Data Utility
Reconciliations
Fees & Invoicing Corporate
4
customers to access a hosted version of the reconciliation solution through a web browser user interface
Client Money
Invoicing Utility Actions
SmartStream’s industry-changing Utility services
Financial institutions cannot address all processing inefficiencies by automation in isolation from their trading partners. Industry utilities are becoming a requirement. Utilities that enable the adoption of a single common process, underpinned by a single data model, fuelled with a single data set will eventually become industry standard
Clean data into reconciliations
Exception raised
SmartStream’s Utility services Linking reference data and post-trade processing
Market complexity and the need to reduce costs are driving the need for shared, standardised delivery of post-trade processing functions
Reference Data Utility
Publicdata
DataAnomalies
Matching &Cleansing Public
data
Research &
Data
DataAnomalies
Matching &Cleansing
Update data Auto match fix and update
Through the RDU, SmartStream is providing the first shared common source of reference data to financial institutions worldwide, minimising trade breaks arising from compatibility issues between customers
Fees & InvoicingAnomalies Data
Analysis
Trade exceptions and failures are reduced as participants use
Manual fixupdate
TLM OnDemand (SaaS model)
P id l bl h t t ti ili ti h t
A new collaborative Utility service to expedite the fees and invoicing process between banks, brokers and inter-dealer brokers (“IDB”). The service is currently being piloted for both OTC and exchange-traded instruments across all asset classes
Aspire
Beyond its SaaS on-demand offering, SmartStream has partnered to create the industry’s first BPO service for reconciliations The Aspire service provides the
shared reference data to:
reduce cost of middle- and back-office operations
improve service for customers (hedge fund and asset managers)
reduce associated market and operational risks
Provides a scalable approach to automating reconciliations where customers are rapidly on-boarded to a delivery model that adapts to their processing requirements at a lower Total Cost of Ownership (“TCO”) than they could achieve with an on-premise application
5
industry s first BPO service for reconciliations. The Aspire service provides the hardware, software and staff to deliver a completely outsourced reconciliations operation
Continuous feedback loop will guarantee ongoing quality improvements for all customers
Large, diversified and blue-chip customer base
SmartStream is focused on serving financial institutions and currently has over 1,500 customers across the globe
Overview of the customer base
The Company’s customers are principally banks and other financial institutions, including more than 70 of the world’s 100 largest banks, the top 10 largest asset managers and the top 10 largest custodians
Key clients by segment
Banks and Brokers
Asset Managers and Hedge
Funds
Custodians, Fund Fund
Administration and Clearing
Houses
Corporates and Insurance
6
Insurance
Comprehensive post-trade lifecycle management solutions
Reducesoperational
cost
Proven ability to apply STP to reduce risks and costs
Overview of key solutions
Reducesregulatory
risk
Reducesreputational
risk
Reducesoperational
risk
Increases revenue
Reducesfinancial
risk
Reconciliations: real-time reconciliation with automated repair of trade exceptions and failures caused by incorrect data, manual errors or inconsistencies between systems and counterparties. This solution is available on-premise, on-demand and as a BPO service
� � � � �
CLM t t d gl b l l ti g t f ll �
�
� � �
� � �
CLM: automated global, real-time management of all money movements, cash and liquidity positions
TPM: co-ordinates and controls the allocation, confirmation, clearing and settlement process whilst applying a rich exceptions management capability
� � �Corporate Actions processing: delivers a streamlined and automated approach to complete, timely and accurate event processing
Centralised RDU: provides a single and externalised approach to data management delivering automatic cleansing of vendor and � � � � �
� �
data management, delivering automatic cleansing of vendor and exchange data required to execute trades from front to back-office
Fees & Invoicing Utility: the electronic management of invoices between provider and customer
7
� � �Trade Finance: automation of manual and paper-based trade finance activities �
The reality of automating Corporate Actions
"The Challenges and Opportunities of Automating Corporate Actions Processing."
Financial institutions are facing a unique challenge; they are expected to reduce operational risk while reducing operation costs, all at a time when many industry experts expect a swell of activity in Corporate Actions activity due to many factors. The automating of corporate action processing has many advantages; it enables an operations team to greatly reduce risk whilst being much less susceptible to processing volume peaks. Additionally, with the removal of repetitive, manual tasks and the attainment of STP, where achievable, corporate action staff is freed up to concentrate on adding value to the service they provide and spend their time focusing on complex voluntary events, where the greatest risk truly lies.
Corporate Actions – why automate?
Corporate actions is consistently regarded as the MOST risk intensive and manualcomponent of back and middle office processing, regardless of the financial institution type.Corporate Actions automation projects are still being driven by the need to:
Significantly reduce operating costs Remove manual processing around mandatory and less complex
voluntary events Focus on exception management Focus on exception management Facilitate seamless integration with external systems, and
automated messaging
Si ifi tl iti t th i k f lCustodians
Hedge Funds
Asset Managers
Broker/ Dealers
Significantly mitigate the risk of loss Ensure event data is accurate and complete Manage elections process, including multiple custodian
deadlines, via an integrated diary
Custodians
Stock Exchange
Significantly improve customer service Improve time to market of event information Maximise event deadlines Maximise event deadlines Enhance arbitrage trading opportunities
Where are these drivers represented in the event lifecycle?
11UsersUsers Corporate Actions Diary Corporate Actions Diary
Client
Notifications
Client
Notifications
Custodians11
11Vendors
ClientsClients22
Data Cleansing
Reputation
Instruction Election Capture33
Custodians33
Risk
O ti C t44
55 Back55
Entitlement Calculation
Operating Costs
Position Reconciliation
A t P ti
55Custodians
66 Back
Office
Back
Office
R i Account Posting OfficeReputation
Corporate Actions Processing
Many financial institutions still process corporate actions manually
Lack of a single, scalable automated event management process
The Current Situation
Legacy systems are expensive to maintain, inflexible andcannot scale
Paper based files create inefficiency and are prone tobeing misplacedbeing misplaced
The use of Excel for diary entries, entitlement calculation and reconciliation is clumsy and is not a justifiable long term solution
Manually driven client notifications are time consuming especially Manually driven client notifications are time consuming, especially where bespoke formats are required for each client
Manual processing of SWIFT, paper, email, fax, letter and phone elections are unmanageable in a growth environment
The lack of reconciliation throughout the event lifecycle can generate unnecessary exceptions and claims processing
Manual processing of entitlements is not maintainable during d kunexpected peaks
Corporate Actions Processing
Mitigate the risk of loss due to missing an event/election,mis-interpreting event details or not processing an election
Automate the entire lifecycle of a corporate action
The Opportunity
Automate the entire lifecycle of a corporate action,in particular data capture and entitlement calculation
Use the latest standards such as ISO15022 to communicate
Focus on exception management processes to mitigate risk Focus on exception management processes to mitigate risk
Enable full STP of multiple data feeds, elections and entitlement posting
Decrease opportunity costs of election decisions by maximising the Decrease opportunity costs of election decisions by maximising the decision period
Mitigate the risk of loss due to missing an event/election, mis-interpreting event details or not processing an election
Solution to manage multiple global processing hubs
Enhanced measurement and reporting from a single database of all corporate actions Manage custodian / data vendors SLA’s
Automated Processing Available Today
Operating Costs Reduced
Risk Reduced
Customer Service Improved
Data capture and cleansing of event information Information can be received in electronic format and rationalised with all
other available sources
The Facts
Maturing Industry Standards continue to drive and facilitate automation
Transform a paper based, manually intensive process into a task based exception management process
Operating Costs
– Reduced through the reduction of manual intervention and the transformation of the process to exception managementtransformation of the process to exception management
Risk
– Reduced, automated event creation eliminates the risk of missing events
Customer Service
– Improved through the freeing up of corporate action professionals time
Automated Processing Available Today
Operating Costs Reduced
Risk Reduced
Customer Service Improved
Diary population and event management Automate the recording of event critical dates, milestones and date
driven actions
The Facts
Operating Costs
– Reduced through the elimination of manual overhead of recording and updating these dates
Risk
– Reduced through the automated task and alert creation. Eliminates the risk of missing key dates and deadlinesthe risk of missing key dates and deadlines.
Customer Service
– Improved through the freeing up of corporate action professionals time and increased efficiencies
Automated Processing Available Today
Operating Costs Reduced
Risk Reduced
Customer Service Improved
Position capture and stock record reconciliation Event level position management and reconciliation can be centralised
Early warning alerts can help to resolve potential problems before they
The Facts
Early warning alerts can help to resolve potential problems before they escalate
Operating Costs
– Reduced through the centralisation of all eligible balances and transactions against the event master record
Risk
– Reduced through the early resolution of reconciliation breaks
Customer Service
– Improved through the enhanced messaging as clients buy into or sell out of the stock affected by the corporate actionsell out of the stock affected by the corporate action
Automated Processing Available Today
Operating Costs Reduced
Risk Reduced
Customer Service Improved
Communication Standard email, fax and letter templates can be adopted to impart any
information anytime
The Facts
y
SWIFT, ISO, XML messages can be created to distribute information throughout the event lifecycle
Operating Costs
– Reduced through the elimination of manual processing
Risk
– Reduced, clients will be informed instantly as soon as event information is received or updated
Customer Service
– Levels are improved through the automated communicationLevels are improved through the automated communication triggers
– Enhanced features such as related holdings can be included on event broadcasts
E l tifi ti f t f ilit t bit t di– Early notification of event facilitates arbitrage trading
Automated Processing Available Today
Operating Costs Reduced
Risk Reduced
Customer Service Improved
Election management Election instruction can be automated via SWIFT messaging, using
standing instructions, online by the client using self service web portals b d di tl th h th UI
The Facts
or by end users directly through the UI
Extended decision windows
Automated custodian elections and deposit state management
Operating Costs
– Reduced through the reduction of manual processing
Risk Risk
– Reduced via automated alerting where client elections are outstanding
– Automated reminders and chasers
– Application of Standing Instruction
Customer Service
– Levels are improved through extended deadlines
– Enhanced messaging and confirmations though automated communication triggers
Automated Processing Available Today
Operating Costs Reduced
Risk Reduced
Customer Service Improved
Entitlement calculation & posting Auto generation of Entitlement Transactions
– Stock & Cash movements
The Facts
Stock & Cash movements
– Charges & Fees
– Withholding Tax & Treaty reductions
– Claims
Operating Costs
– Reduced through the reduction of manual processingg p g
Risk
– Eliminated via automated processing of entitlements
Customer Service
– Enhanced with automated confirmation advices
Automated Processing Available Today
Operating Costs Reduced
Risk Reduced
Customer Service Improved
Reporting Measure & Manage
Single corporate action depository enables the generation of multiple
The Facts
Single corporate action depository enables the generation of multiple MIS reports
– Metrics of seasonal volumes, key performers
– Manage custodian and data vendor SLA’s
Operating Costs
– Reduced through the identification of poor performance
Risk
– Reduced via trend analysis
Customer Service
– Enhanced with increased information
Market Size & Growth
Market Size & Growth
Growth is predicted to be largely driven by increased spending on automation software
WHY? New Data Standards
DTCC leadership
XBRL Initiatives
SEC Enforcement
Market Size & Growth
Standardisation of the Corporate Actions format in North America and Asia Pacific brought on by regularity
freform should lead to spending growth starting in 2012.
Firms Investing in Corporate Actions Processing
A majority of firms plan to invest in corporate actions improvements in the next two years
Automating the corporate actions workflow reduces direct costs fromdirect costs from processing failures and provides indirect benefits to the front-office.
Specifically, automating the corporate actions process provides investment managersinvestment managers with a richer information window to analyse data, improving individual productivity.productivity.
Real life stories:
Clients that have automated their Corporate Action processing with SmartStream’s p p g
TLM Corporate Actions
Preservation or improvement of reputation
The actual or perceived quality and timeliness of corporate actions processing canhave a huge impact on a firm’s reputation.
Inaccurate, inefficient event notifications and elections processing was the keydriver behind the project for a major investment bank.
Front office staff did not have access to accurate start of day cash and stock positions Front office staff did not have access to accurate start of day cash and stock positions,and consequently experience a high rate of failed trades.
Custody operation consistently failed to win new business and lost existing clients Custody operation consistently failed to win new business and lost existing clients,due to the lack of an automated corporate actions system.
Largest custody client, ceased using outsourced corporate actions service and brought itin house – using TLM Corporate Actions.
Trends, Themes and Competitive Advantage
Risk Mitigation Remains the Key Corporate Actions is all about reducing the risk
It does not make the press but there are still big losses against Corporate Action processing It does not make the press but there are still big losses against Corporate Action processing –Leading financial institutions have dropped appx 20mm over the last couple of years
Capital adequacy rules
Enhanced service level
ROI and FTE reduction
Turning Corporate Actions into a profit-generation or profit-optimisation tool has started to become a theme Investment Banks benefit here, whereby injection of timely CoAc data into the trading arms of the
organisation is perceived as a competitive advantage
Hedge Funds where they deliver event notifications with details of Related Holdings to the trading desks to ensure all event impacts & investment opportunities are researcheddesks to ensure all event impacts & investment opportunities are researched
Metrics and Reporting Measure to manage
Why Automate – A real life story:
SmartStream Data Management Services
SmartStream Data Management Services
SmartStream Data Management Services
Business Unit of SmartStream Technologies, the leading software vendor focused on middle & back offices operations
Data Management Services, based on our Universal Data Model, that provides high quality, consistent reference data, pricing, corporate actions and indices services across all data types
Operations staff in Santa Clara, Bristol and MumbaiServices
Focused on improving quality and reducing costs of delivering consistent reference Powering utility -like services leveraging shared people, content , IT infrastructure and processes
driving down the cost of transaction processing through utilities
What we do improve quality of reference data to meet client’s compliance and new regulatory requirements scalable solution, using consistent business rules across all data type flexibility to provide various delivery mechanisms, protocols and formats clients required subscription service allowing clients to pay only for the data they need, when they need it minimize the time it takes process new data feeds and sources to 2-4 weeksp
Services
Reference Data Management Services and Symbology Cross Reference Pricing Data Management and End of day Pricing History Corporate Actions Event Cleansing Financial Data Dictionary
AvailableFinancial Data Dictionary
Global Market Calendar Service Indices and ETF Data Management and History Legal Entities and Hierarchies
Investment Banks/Primary Dealers
Target Clients Asset Managers/Hedge Funds Custodians Exchanges Corporations
Service Model
Data Quality, Scalability, Efficiencies
Single relational data model combining: Securities data SSIs
L l tit d t
Works with any client’s proprietary or existing third party technologies
Handles any data vendor feeds 5-tier Quality Control Processes
Exception Management
Operating Model
Legal entity data Corporate actions Roles
Operating Model
Exception Management Inherent in computing platform Helpdesk and Monitoring technologies
Vendor Mgmt SLA Customer Services Operations Mgmt Process Innovation Processing Agent g p g g g
Capture Client Feedbacks Root Cause Analysis Quality Control Client Adaptation
Acquisition Reconciliation Enrichment Distribution
Services and Integration areas addressed
From customized services to niche services to providing enterprise wide data management services, we will cater to your requirements:
Reference Data ManagementReference Data Management
Equities, Equity Derivatives, Fixed Income
Index Re-Computation constituent identifiers, price, shares and weighting of the individual constituents and intraday corporate actionsindividual constituents and intraday corporate actions
ETF family composition; ETF constituent identifiers, price, shares and weighting of the individual constituents in the ETF, ETF history
Granular Corporate Actions scrubbingGranular Corporate Actions scrubbing
Symbology Cross Referencing
Financial Data Dictionary
G CGlobal Market Calendar
What does SmartStream Reference Data Services deliver?
Clean reference data files
Eliminating the need for expensive resources dedicated to maintaining custom data loaders to extract transform and load data from vendor filesto extract, transform and load data from vendor files
SmartStream Utilities acts as your agent, providing custom data services to
Sourcing data from exchanges, vendors, end users etc.
Aggregate, normalise, cleanse using proprietary Universal Data Model (UDM)
Produce customised data feeds
Driven by business rules, custom data files are constructed to the clients specification
Files/messages populate a centralised Security Master File (SMF)
Files are generated for: accounting, compliance performance measurement, reporting, billing, order generating systems, trading and portfolio management
Each file is uniquely created for the specialised needs each systems
SmartStream runs quality controls and manages the exceptions, minimising resourcing requirements
The Data Process
Acquisition Validation Enrichment Distribution
Manage receipt or acquisition of data
Categorise and Identify data Rules-based acquisition of data sources
Manage changes to data formats
Parse, interrogate and normalise data
catalog data
Rules based reconciliation
Raise exceptions
completeness and supplement where needed
Notify data management team
composition
Support for delivery mechanisms
Support for delivery and normalise data
Measure consistency, conformity and competences
Measure and
and notifications of incomplete or inaccurate data
Measure and store data quality for
management team of process, results and vendor issues
Measure effectiveness of
protocols and formats
Measure and store metrics for delivery incl timings quantity Measure and
manage service levels
data quality for service level management
vendor data and enrichment
incl. timings, quantity and composition
Vendor Level Quality ControlVendor Level Quality Control
•Completeness•Format/Structure•Timeliness
Asset Type Level Quality ControlAsset Type Level Quality Control
•Mandatory Fields•Business Rules•Corporate Actions Applications
• 4-eyes
Fields Level Quality ControlFields Level Quality Control
•Intra-Vendors Recon
•Business Rules•Corporate Actions Applications
Data SupplementationData Supplementation
•Manual Interventions
•Data Extractions from original sourcesB i R l
Clients SpecificationsClients Specifications
•Business Rules•Distribution Rules•4-eyes•Client Rules
•Client Rules •4-eyes•Clients Rules
•Business Rules•4-eyes
SmartStream Corporate Action Services
Cleanse data at the inception of the event announcement to facilitate and expedite the next sequential stages of the event lifecycle – thus improving quality, reducing operating costs and increase STP rate Capture Announcement
– Market level event data
Golden Record creation
– Normalize, cleanse & enrich data
– Early notification of validated event master record
Combining vendor, custodian and exchange feeds into a single cleansed data feed delivered in any format
Use proprietary 5-tier Quality Control Processes to cleanse, refine, and enhance data quality that is under-pined by measure and tangible SLAs
“Because the data matches between data sources do not mean the data is correct 2 bad data doesBecause the data matches between data sources do not mean the data is correct – 2 bad data doesnot equal good quality”
SmartStream Corporate Action Services
Event Announcement Ex Date Instruction Deadline Date Record Date Pay Date--
-- --
----
-- --
----
--
- -- --
Corporate Action Event Lifecycle
Required fields are constantly monitored/researched with exchange Capture Announcementwebsite and issuer until completeness
Mandatory and Important Fields Data Cleansing Matrix based on corporate action types
Exceptions Management
p
Market level event data
Golden Record creation
Normalize, Exceptions Management
Logical/Relational Relationship of fields
Threshold Calculation
Trends and patterns Algorithm
o a e,cleanse & enrich data
Early notification of validated event master record
Holiday/Weekend/Business Day Rulesmaster record
SmartStream Corporate Actions Services
1. Vendor Level Quality Control: All Corporate Actions are collected as they are announced
File validity verification (format, structure, etc.)
Monitor vendor performance against pre-defined service level agreement
Manage receipt or acquisition of vendor and proprietary data sources
Measure consistency, conformity and completeness of data
2 Asset/Corporate Action Type Level Quality Control2. Asset/Corporate Action Type Level Quality Control Data Enrichment for missing values
Determines the accuracy and completeness according to MDS and client-defined business rules
3. Fields Level Quality Control Business Rules, Logical Verification, Threshold Calculation, Fields relational Validation, Holiday Rules, Weekend Rules,
Business Day, 4-eyes principle, Data Overwrite and Locking, Delta verifications
4. Data Supplementation Manual Interventions/ Exceptions Management Exchange Websites Management Monitoring of Corporate Action Manual Interventions/ Exceptions Management, Exchange Websites Management, Monitoring of Corporate Action
Announcements and/or corrections, Data extraction via screen scrapping, Data down load via pdf or flat file, Logical attributes relationship, Market Specifications , Pattern Extrapolation/Extension
5. Clients Specifications File Distribution Rules Client Profile/Subscription Proprietary Business Rules File Distribution Rules , Client Profile/Subscription, Proprietary Business Rules
SmartStream Corporate Actions Services
Feed Information Any vendor feed supported regardless of format
Any custodian feed supported regardless of format
Client specific ‘Securities of Interest’ file uploaded Client specific Securities of Interest file uploaded
ISO 15022 and 20022 supported
XBRL supported
Capability to store issue conditions, cash flows (distribution, redemption), mergers, acquisitions, legal di li id ti / l it l hproceedings, liquidation/sale, capital change
Service Information Automated data loading
Data cleansing and completeness checking leading to event creationg p g g
Exception Management workflows determine exceptions for resolution
Cleansed data feed output in any format, at any frequency
GUI or data feed output option
Message Information All standard ISO event types supported, additional non-standard event types supported
All Mandatory and Voluntary event data provided
Core, cleansed event information including all dates, terms and options are normalized, g , p
Industry Direction & Initiatives
On premise vs. Cloud-based
ISO20022 & XBRL Move to XML based and tagged messaging is gathering momentum
XML based ISO 20022 messaging is the way forward but with so many institutions just completing ISO 15022 projects the speed of adoption will be interesting
Value Add services: Value Add services: Class Actions and Tax Reclaim processing as a service
OCR processing
Corporate Actions Automation – The real questions
How much capital do you put aside to offset risk of processing corporate actions
How do you manage season peaks in processing volumes
Do you know what your current of future exposure is to corporate action losses
Attrition rate of quality, experienced corporate action staff
Questions?Questions?