Capital Alpha & Capital Sigma and has been profiled amongst corporate actions solutions providers in Celent report titled 'Corporate Actions Processing in the Digital Era'
With growing volumes and complexities of corporate actions, intensifying regulatory scrutiny on transparency in corporate governance, and diminishing tolerance of financial institution errors, all intermediaries involved in corporate actions processing must improve their operations. Further, corporate actions information is becoming more important in the front and middle offices as it is being incorporated into investment decision-making, portfolio and risk management, and efficiency and transparency improvements.
This calls for rethinking reference data management and corporate actions processes. Technology adoption in corporate actions processing has grown slowly over the last two decades. Custodians and large buy and sell side institutions have higher levels of technology adoption and automation. Smaller players and those serving retail investors still significantly rely on manual processes, but this is changing. There is a shift away from in-house production to buying third party off-the-shelf solutions that have low cost of ownership, faster implementation time, and adhere to latest standards. Large banks value functionality highly, while smaller banks prefer a single end-to-end solution with high workflow support. On the data side, there is a move toward more enterprise-wide master data management and moving away from batch to real time data to enable self-servicing for bank personnel as well as clients. There is also a desire to reduce or eliminate redundancies in the golden record creation process.
All types of institutions generally prefer a modular approach in recent years to minimize costs, risks, and operational complexities in technology transformation. Developments in new technology and low-cost operating models offer opportunities for significant improvements in corporate actions processing. firms at early stages of automation, adopting industry standards coupled with traditional rules-based and workflow automation can go a long way in streamlining operations. For mature players that already use rules-based workflow automation tools, a new generation of automation tools, such as robotic process automation (RPA), artificial intelligence (AI), and machine learning (ML), are opening new horizons in the automation journey.
Solution Providers Are Evolving Their Offerings with New Technologies
The solution provider landscape in corporate actions comprises a diverse mix of data vendors, data management solutions and service providers, market infrastructure players, custodians, and technology and service providers. All are incorporating the new technologies and models to enhance their solutions. To adapt to the new era of digitalization, many financial institutions are undertaking significant legacy modernization efforts as part of enterprise-wide transformation projects.
Proud moment for Intellect
Intellect’s Capital Markets suite of products - Capital Alpha – an integrated Broker-in-a-Box solution & Capital Sigma – Intellect’s offering in Asset Servicing have been profiled amongst leading corporate actions solutions providers globally in Celent report titled 'Corporate Actions Processing in the Digital Era'.
Celent states – “Intellect Design has worked on a PoC leveraging a third party platform for identifying reasons for breaks in reconciliation and has applied machine learning for improving operational efficiencies by predicting staffing requirements during peaks and troughs of the corporate actions season.”
Intellect Design’s Corporate Actions solutions serves both buy and sell side institutions.
- Its Asset Servicing solution for the buy side includes support for corporate actions processing for custodial holding as well as fund accounting and AMC holdings.
- On the sell side, Intellect’s enterprise brokerage platform Capital Alpha includes corporate actions support for non-custodial holdings as part of brokerage back office.
These solutions support all functions across the corporate actions lifecycle.
Event management and prioritization allows event data capture and prioritization of data sources for corporate action events. It has the capability for defining rules for creating golden records, creating events automatically, and maintaining them through a self-service portal. Notification and responses support outbound communication to clients through SWIFT messages and emails. It also includes standing instructions support for client responses and reminder messages for non-receipt of client responses. Entitlement processing incorporates a cognitive entitlement computation engine that offers options for entitlement computation on traded or settled positions, and automatically re-computes entitlement based on changed positions. The operations dashboard shows a view of forthcoming events for monitoring and prioritizing daily and weekly tasks and allows drill down at event level.
Intellect’s solution is compliant with ISO 150022 standards, and a key item on its roadmap is to make it fully compliant with ISO 20022 standards, which is slated for launch toward the end of 2019. Another initiative is a new enterprise-integration platform, called Olive Fabric, that is intended to solve integration challenges up and downstream, not only for Intellect’s products but also with banks’ internal and other third party applications. Corporate actions is a good case for Olive Fabric’s application as it involves dealing with exchanges, CCPs, CSDs, data vendors, regulators and also requires collecting data and communicating with clients over different channels and systems. Since all these systems are often changing, Intellect’s aim is to reduce the impact of interface changes through this configurable and low coding-based integration platform.
Intellect is also leveraging RPA, AI, and machine-learning technologies, and applying them in corporate actions. It has worked on a PoC leveraging a third party platform for identifying reasons for breaks in reconciliation. Similarly, it has applied machine learning for improving operational efficiencies by predicting staffing requirements during peaks and troughs of the corporate actions season. Additionally, Intellect has built a native AI platform, called Dolphin, that derives intelligence from image, text, video, and speech. It is intended to integrate with business processes and improve straight-through processing rates. Intellect plans to apply it to several use cases including corporate actions beginning in early 2020.
Time for Action in Corporate Actions
Corporate actions processing has been put on the back burner for too long as financial institutions have been pre-occupied with business and regulatory pressures of the post-crisis era. Industry-wide efforts for improving standardization have progressed at a slow pace. But the costs and regulatory and reputational risks of erroneous and inefficient processing should not be ignored any more. Expanding use of corporate actions information in the middle and front offices for risk management and investment decision-making should further drive the urgency to rethink corporate actions operations. The good news is that vendor solutions and service offerings have matured in this area, and vendors are offering low-cost best-in-class solutions incorporating new technology and operating models. This is a good time for revisiting corporate actions operations, and acting now would position them well to compete in the new digital era.