Corporate Actions Guiding Principles

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					Corporate Action Reengineering
         BDUG Conference
         October 18th 2006
SOURCE:
Securities Origination Underwriting Reliable Corporate
action Environment

    A unified end-to-end platform from issuance through the entire asset
    servicing life cycle: Underwriting – Corporate Actions – integrated
    with Master files and other Core Depository functions

                                             Security Master Files
         Corporate Actions




    Underwriting
    * NIIDS                                          Shared
                                                     Interfaces
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    Reengineering Objectives

     • Provide more accurate and timely servicing information

     • Replace legacy sub-systems with newly architected platform

     • Automate and streamline redundant processes and data storage

     • Increase flexibility with rules-based system

     • Enhance functionality: ISO15022, multi-currency

     • Reduce ongoing technology support costs

     • Consistency of processing – Common field definitions and
       business rules

     • Revamp New Issue Information Dissemination
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    Current State of New Issue Processing


     • New Issue Information Dissemination

       • Syndicate Desk – Communicate to members of the
         underwriting syndicate – Automated/Manual

       • Syndicate Desk – Communicate to the street (Vendors/non
         syndicate members) – Manual

     • Trading of New Issue

       • Middle Office (Trade support) – Procurement/Receipt and Set
         up of New Security Master Data - Manual at firm or vendor

     • DTC Eligibility, Closing and Distribution

       • Syndicate Operations – Communication to DTC and other
         industry utilities - Manual
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    Future State of New Issue Processing

    •   New Issue Information Dissemination – How will DTCC automate?

         • DTCC is linking with major book building/running services (Bondesk
           Syndicate, Dealogic, i-Deal, Marketpipe, NAPA, Bloomberg Deal, ZIA)

         • DTCC has flexibility to link with underwriters proprietary book
           building/running, trade processing, security master system(s) or
           service bureau

         • DTCC is linking to information service providers, service bureaus,
           participants, and regulators

    •   Trading of New Issue – How will DTC automate?

         • DTC will provide for real time distribution of new issue information
           required for security master set up for DTC Participants and Bank
           Custodians.

    •   DTC Eligibility, Closing and Distribution – How will DTC automate?

         • Syndicate Operations – DTC will store new issue information for the
           purposes of eligibility closing and distribution
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    Future State Benefits New Issue Information Dissemination


       • Avoids re-keying – STP from bookbuilding/running systems

       • Automated regulatory compliance of MSRB rule G34 and NASD
         rule 6260

       • Automated dissemination to vendors in real time – Bloomberg,
         Interactive, S&P, ect

       • Facilitates faster processing of secondary market trades -
         Automated receipt of security data in real time

       • Facilitates compliance of new SEC access = delivery rules for
         prospectus delivery
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    NUWS / NIIDS Project Milestones


    • Completed Proof of Concept Q3 2006

    • Commence UAT Q4 2006

    • Commence testing with vendors and pilot firms – Q1 2007

    • Begin transition Q2 2007

    • Go live - August 2007
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    Corporate Action Processing and
            Announcements
8
    Project Milestones

    • Complete analysis and functional design Q2 2006

    • Release file layouts to industry Q4 2006

    • Complete development Q3 2007

    • Initiate UAT Q4 2007

    • Commence transition Q3 2008
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     Industry Outreach - Communication

        • Aggressive outreach program includes

           • Participants

           • Vendor/service bureaus

           • Agents

           • Guidance Council

        • Communications approach

           • Focus sessions

           • Website (host webcams, FAQs, and presentations)

           • eLetter

           • News releases
10
     System Implementation (Transition and Migration)

        • Current focus on data migration

        • Parallel testing

           • Execute migration procedures

           • User access

           • Testing of all functionality

        • Phased approach

           • MMI

           • Distributions and Redemptions

           • Mandatory events

           • Voluntary events and Mandatory with Option events
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     System Implementation (Transition and Migration)

        • Risk mitigation is key decision driver

        • Process

           • Architectural proof of concept

               • Test concepts

               • Test code compliance with industry standards

               • Use of best practices

               • Security analysis (code vulnerability)

               • Iterative
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     System Implementation (Transition and Migration)

      • Testing Game Plan

          Final UAT - 9 months

          Scripted - 4 months

          Parallel - 5 months

      • Execute “talkback” process between production and parallel
        e.g. instructions

      • Transition to begin post successful parallel
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     Training

        • DTCC has partnered with a vendor for Underwriting as test
          case

        • Learning Approach

           • Context sensitive help

           • E Learning

           • Instructor lead training

           • Job aids

           • User manual

           • Service guide
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     Corporate Action Announcements - @Source
     2007 Strategic Plans


      • Service Offering

        • Fees based on existing fee schedule

        • No additional charge for the universe

      • Implementation of more comprehensive service standards on
        DTC-eligible announcements

      • Remove dependency on selected vendors by strengthening
        DTCC‟s „manufacturing‟ capability

      • Introduce future rationalized events, fields and statuses as part
        of the re-engineering of the existing announcement files
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     @Source Impact on Service Bureaus


     • Service Bureaus will receive universe file from DTCC

       • Service Bureau will be required to submit to DTCC a list of all
         non-Participants they represent and respective SOI‟s

       • Service Bureau will be charged on behalf of all non-
         Participant clients

       • Service Bureau must execute a legal contract defining use of
         the data
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     Guiding Principles for the New DTCC Corporate
     Action Announcement: Event Content (A reminder)


     • Single event ID for the life of the announcement

       • Currently, announcement IDs are based upon
         CUSIP/Activity Code

     • Elimination of DTC function codes

       • Simplify the Event Types and remove „processing‟
         references

     • Provide more information on Options and Payouts

       • Remove Contra CUSIPs

         • Option tracking done by RRG Account
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     Guiding Principles for the New DTCC Corporate
     Action Announcement: File Concepts


     • Publish Information in 2 formats

       • ISO15022

       • XML

       *Currently DTC publishes in propriety formats

     • Publish ALL Events in a single file

       * Currently DTC announces within 3 main files: REORG,
       REDEM and DIVANN
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     Guiding Principles for the New DTCC Corporate
     Action Announcement: File Concepts


     • Publish Event Details in a single message
       • General event information

       • Option details

       • Payout details

       * Currently DTC provides separate messages per event option

     • Intra-day delivery option for all announcements

       * Currently end of day batch processing
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The ISO15022 MT564 (notification) will be primary format and
supplemented, as needed, with the MT568




        Receipt and Delivery of XML will take a similar path but
      without defined XML standards for Corporate Actions, DTC
                 will take a lead with our own format.
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     ISO15022 Format: Data mapped where possible, otherwise
     information will be published within the ‘Text’ Blocks

• The additional data will be provided in the Text blocks within MT564
  Sequences D, E and F; mapped to the most appropriate Sequence

• For example:

      • „Chill‟ On/Off Days will be found in Sequence D under the qualifier
        INCO (information Conditions)

      • Tax information will be found in Sequence D under the qualifier
        TAXE (Taxation Conditions)

      • Fractional Share Information on payouts will be found in
        Sequence E under the qualifier TXNR (Narrative Version)

      • Additional information will flow onto the MT568 when the MT564
        10k byte limit is reached
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 ISO15022 Format: Data mapped where possible, otherwise
 information will be published within the ‘Text’ Blocks.

 • ISO15022 „text‟ blocks accommodate 10 lines of 35 bytes (10*35x) but can be
   expanded by using tag 70e qualifiers, of which certain qualifiers are
   repeatable

 • Additional data presented with the same name as XML version, for example:

     • „Hearing Date‟ will be shown as <HearingDt> or „Chill Release Day for
       Deposit‟ will be shown as <ChillReleaseDayForDeposit>

 • A single line will consist of only 1 data element name/value, for example:

     • :70E::ADTX//<HearingDt>20060831</>

 • Where the data name and the value exceed 35 characters the data will flow
   into the second line, for example:

     • (Line 1) :70E::INCO//<ChillReleaseDayForDepo
        (Line 2) sit>20060831</>
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     A side by side example of a Cash Dividend in XML and
     ISO15022
           XML Version                                         ISO15022 Version
                                                          :16R:GENL
                                                          :20C::CORP//1234567890123456
                                                          :20C::SEME//1234567890123456
                                                          :23G::NEWM
                                                          :22F::CAEV//DVCA
                                 Event Type               :22F::CAMV//MAND
                                                          :98C::PREP//20060718101500
                                                          :25D::PROC//PREC
                                                          :16S:GENL
                                                          :16R:USECU
                                                          :35B::ISIN/US/CUSIP1234
                                Record Date               :16R:ACCTINFO
                                                          :97C::GENR
                                                          :16S:ACCTINFO
                                                          :16S:USECU
                               Non ISO Field              :16R:CADETL
                                                          :98A::RDTE//20060731
                                                          :98A::XDTE//20060730
                            Placed in Tag 70E             :98A::PAYD//20060815

                             „General Details‟ (Seq. D)   :70E::ADTX//<EXDATE>CA/20060728</>
                                                          <HistoryStatusDate>20060731</>
                                                          :16S:CADETL
                                                          :16R::CAOPTN
                                                          :13A::CAON//001
                                                          :22F::CAOP//CASH
                                    Option                :11A::OPTN//USD
                                                          :17B::DFLT//Y
                                                          :98A::PAYD//20060815
                                                          :92F::NETT//USD1.00
                                                          :16R::ADDINFO
                                                          :70E::PACO//<ADD1>DTC Customer
                                      Rate                Support</>
                                                          <ADD2>55 Water Street</>
                                                          <City>New York</>
                                                          <State>NY</>
                                                          <Country>USA</>
                                                          <Phone>1-888-DTC-CUSP</>
                                                          <Fax>1-212-855-1000</>
                                                          <Email>Customer.Support@dtcc.com</>
                                                          :16S::ADDINFO
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 Unsupported Files in ISO Format published in XML


     Function Name                        File Description                      Outbound
       CSHDAL              MMI Cash Settlement Dividend Allocation File            Y
       CSHDPJ              MMI Cash Settlement Dividend Projection File            Y
       CSHDUN             MMI Cash Settlement Dividend Unallocated File            Y
       CSHEUD           Cash Settlement End of Day Unallocated Funds File          Y
       CSHPRJ                     Cash Settlement Projection File                  Y
       CSHRAL               MMI Cash Settlement Reorg Allocation File              Y
       CSHRPJ               MMI Cash Settlement Reorg Projection File              Y
       CSHRUN              MMI Cash Settlement Reorg Unallocated File              Y
       CSHSET                      End of Day Cash Settlement                      Y
     CSHSTA thru G            Hourly Slice of Cash Settlement Activity             Y
       CSHSTL              Dividend/Reorg Cash Settlement Information              Y
       CSHUNL                Cash Settlement Unallocated Funds File                Y
       RDMENT                 Reorg Deposit Mandatory Entitlements                 Y
       STKPND        Next Day Projected Stock Loan ash Settlement Information      Y
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     Questions?
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