As a result, many market participants spend too much time and money managing corporate actions, including dealing with potential errors in data. This creates a burden on companies’ operations and can slow the process of announcing events, capturing and reviewing relevant data or taking necessary action.

What’s more, failure to make timely investment decisions can mean missed opportunities, especially in the current environment of increased corporate activity. 

To help identify potential solutions and assess the state of the market, we recently sponsored industry-wide research, culminating in the release of a benchmarking report, Corporate Actions in Australia: The Case for Transformation*

As the name suggests, the report reveals a compelling case for transforming corporate actions in Australia. For example, it shows that market participants that have automated their corporate actions data processing are paying significantly less for their data and have fewer issues.

The challenges of processing corporate actions in Australia

To be fair, the Australian model for corporate actions has proven effective in supporting the needs of issuers and investors over many years. However, it now presents challenges to market participants due to increasing complexity.

Australia is unique in its range and complexity of corporate events. From RAPIDS (renounceable accelerated pro-rata issue with dual book-build structures) to schemes of arrangement and deferred settlement securities, the huge range of possible event types in Australia presents education and processing challenges every day.

The number of events also continues to increase. ASX publishes around 150,000 company announcements annually, within which there are just under 5,000 corporate actions across 25 corporate action types.

While market participants have shaped numerous processes to deal with the complexity each day, the efficacy of those processes varies significantly. Corporate actions have, until recently, involved a manual, labour-intensive process that includes reviewing paper-based or PDF-based information and transcribing it into systems. Inefficiencies occur due to the time and resources required to manually process the corporate actions. With transcription, of course, there is also potential for manual error. This can lead to further inefficiencies, possible delays and additional costs in the processing of corporate actions for all market participants.

Survey respondents report that more than 46% of corporate actions data is still submitted manually. This hinders the ability of companies to issue corporate actions promptly and to efficiently service their clients. In fact, Australian market participants report their handling of corporate actions data is 25% less efficient than the global average.

The associated costs

The survey results indicate that the complexity in manually processing corporate actions data comes with significant costs. Additional costs are incurred whenever a corporate action is processed incorrectly. Costs also arise from the need to triangulate multiple data sources, whether that is from the issuer announcement PDFs available from ASX or data feeds from data vendors, and sometimes even the need to call a company to get a better understanding of the corporate action.

Australian brokers’ data-sourcing expenses alone take up a huge 46% of the total cost of their corporate actions. This single cost is more than the entire costs to brokers of processing events from data entry onwards, which means it costs more just to source basic event data than it does to process the event through the system.

At the same time, custodians appear to face a slightly different challenge. While their data-sourcing costs are only 22% of the total cost of a corporate event, their costs of validating, cleaning and enriching the data make up 35% of the total cost of an event.

Across the intermediary landscape, the evidence is clear – the complexity of the operating model is directly impacting the P&L of market participants. And that cost must be borne somewhere.

Sixty-one percent of survey respondents say they need to hire more people this year to manage corporate actions via the current manual processes. Companies also indicate they spend 5% more than the global average for consolidated market data feeds and use global data standards for only 13% of their messaging.

The future

The statistical insights in the report suggest a compelling case for transforming corporate actions in Australia.

By adopting common messaging standards in the future, market participants can process and distribute data much more efficiently. Data will also be less susceptible to errors associated with manual rekeying, thus improving accuracy, quality and timeliness.

Over the next three years, 48% of organisations in the market plan to revise their data sourcing, focusing specifically on data feeds. The fact that these plans have a higher priority than hiring and deploying robotics indicates that investors and intermediaries are all focused on a single, common objective: getting the data right.

Australian market participants that have already automated their corporate actions data processing are paying 48% less for their data than those continuing to handle information manually. They also experience 17% fewer issues with corporate actions in their business.

Australian market participants vary in their understanding of their current challenges. However, the market is consistent on two key points:

1. Corporate actions are a data problem.
2. ASX is the trusted partner to help resolve it.

The survey results show that exchanges are the most trusted sources of corporate actions data, scoring 10% higher than any other institution. Of the many data providers across the market, respondents cited ASX as the most trusted provider of actionable corporate actions data in Australia. This makes it the natural partner of choice for all profiles of institution as they set out to optimise data flows.

ASX has, therefore, embraced the task of driving the transformation of corporate actions data processing in Australia.

Solutions that can help the market get there

The survey indicates that there is no silver bullet for corporate actions automation and no single off-the-shelf solution that can satisfy everyone’s immediate needs.

Market participants are also sceptical that any platform will be able to deliver the required level of resilience, in terms of straight-through processing (STP) in a timeframe that justifies the transition.

However, ASX’s Real Time Corporate Actions service, built in consultation with the industry, is a golden copy data source of corporate action event information. Issuers complete a standardised form, and our STP service quickly distributes data to the market in a format that is structured, compliant and machine readable.

An extension of our End of Day (EOD) batch file service, Real Time Corporate Actions offers faster, more comprehensive data, delivered in an easy-to-process, industry-standard, ISO 20022–compliant format.

The service encompasses all corporate action events covered by ASX and additional data items not available via EOD. Importantly, this data contains key identifiers applied by ASX, such as the event types and the official corporate action event id, also used in CHESS for post trade services.  CHESS replacement will be consuming the same ISO 20022 event notifications to ensure consistent and standardised data and to support enhanced event services for market participants. 

The provider and subscribers will invariably need to engage in a period of collaboration, of 18–24 months, to fully harness the service’s power. However, through open, transparent engagement, they can address key issues together and shape a solution that delivers significant improvements in STP speed and accuracy when compared with current processes. An early adopter of the solution has quoted an 80% increase in STP rates from using ASX's Real Time Corporate Actions service.

Corporate Actions in Australia: The Case for Transformation, produced by The Value Exchange and sponsored by ASX, gathers insights from over 60 financial market participants to provide a comprehensive view of the Australian Corporate Actions landscape. If you haven’t yet read the report, take the opportunity to review the key highlights and explore the data behind the insights. Access the report here.

You can learn more about ASX’s Real Time Corporate Actions or get in touch with us to find out more.