SWIFT innovates to remove friction in corporate actions

This article was originally posted by SWIFT.


We’re collaborating with seven securities players – including American Century Investments, Citi, Vanguard and Northern Trust – to drive efficiencies in communicating significant corporate events. The project will trial an ambitious solution powered by Symbiont’s enterprise blockchain platform.

When an event takes place at a publicly traded company – dividend payments, exchange offers, mergers, Dutch auctions or other corporate actions – the information needs to be quickly shared with investors, creditors and all other key stakeholders.

Automation of these communications has improved in recent years, but it’s still heavily dependent on manual processes that create both added costs and risks for market participants. The problem is compounded by the number of intermediaries – central securities depositories (CSDs), local and global custodians, fund managers, paying agents, etc. – which make up the investment chain. Each has to pass on information about the event and, because they follow different data standards, may communicate about it slightly differently. We are collaborating with our community to deliver a solution that delivers accurate corporate action data to market participants in near real time. Jonathan Ehrenfeld Strategy Director, SWIFT This creates complexity for asset managers, custodians, brokers and other recipients downstream as they receive information about the same event from multiple issuers and, in some instances, with missing, contradictory or inaccurate data. They then have to manually comb through, compare and clean the data to arrive at a single accurate picture of the event so they can make relevant decisions.

“Major asset managers will have hundreds of custodian relationships, with assets and securities scattered across a wide range of counterparties,” says Jonathan Ehrenfeld, Strategy Director at SWIFT. “If there’s a corporate event, these asset managers and other intermediaries will receive information from all these sources, and this is where we start to see problems.” Improving data quality

With the financial services industry struggling with rising overhead costs, growing business complexity, and post-pandemic labour shortages, firms are looking to drive operational efficiencies in non-revenue generating activities such as corporate actions. “According to our analysis, manual activities – such as data cleansing, formatting and interpretation – account for around 30% of the costs involved in processing corporate actions,” says Ehrenfeld. “That’s why we are collaborating with our community to deliver a solution that delivers accurate corporate action data to market participants in near real time.” Transforming the experience

As part of a new pilot project to further automate and increase the accuracy of the corporate action workflow, SWIFT is trialling fintech Symbiont’s proprietary technology platform, Assembly, using its smart contracts and blockchain capabilities to create a network effect that leverages the 11,000+ institutions connected to SWIFT globally. Also participating in this initiative are a number of leading custodians and asset managers, including American Century Investments, Citi, Vanguard and Northern Trust.

“By bringing Symbiont’s Assembly and smart contracts together with SWIFT’s extensive network, we’re able to automatically harmonise data from multiple sources of a corporate action event,” says Tom Zschach, Chief Innovation Officer at SWIFT. “This can lead to significant efficiencies. Corporate action data from SWIFT messages is translated by the SWIFT Translator and uploaded in Symbiont’s blockchain. Their smart contract technology can then compare information shared between participants and flag discrepancies, contradictions or inconsistencies across custodians.” Symbiont’s private blockchain solution enables pilot participants to unlock numerous opportunities. Most notably, Symbiont’s Assembly platform supports greater transparency through the creation of a single unalterable record, which provides a digital audit trail, privacy, versatility and the delivery of key statistical data. Quantifying the benefits This initiative has the potential to deliver various benefits for market participants. At a sub-custody level, it could help providers distribute data in near real time to global custody clients. This in turn will enable information to be made available to asset managers in good time, allowing them to make trading decisions more quickly. The solution also has the potential to allow asset managers and custodians to automate how they compare corporate action information sent to them from multiple sources, leading to further back-office savings.

“If the solution proves successful, intermediaries would need to field fewer queries from clients about corporate action data. It also means global custodians and asset managers could reduce the number of people who spend their time manually scrubbing corporate action data,” says Zschach. With more accurate corporate action information at their fingertips, asset managers could also mitigate the risk of making investment errors, as well as avert serious losses or even fines.

The solution is currently in development with a pilot group of participants that are set to test it and provide feedback in September. We will then compile the results and share them with the community. If successful, we look forward to extending coverage to more corporate event types and will assess the potential to bring it to production for the wider SWIFT community. If your institution would like to help transform the future of finance, we want to hear from you. Get in touch at innovate@swift.com to start innovating with us.