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ISLA Decomplexifies Corporate Actions in Preparation for SFTR

Last month, Andrew Dyson commented in a Reflections of the CEO’ piece; “We are starting to look more closely at the handling of corporate actions in the context of securities lending, notably SFTR, where ISLA is developing a pan industry consensus of booking processes to overcome the as yet unfathomed regulatory reporting obstacles.”

Since then, ISLA has held four working group meetings involving 25 member firms, and including Lenders, Borrowers, Software Providers, Exchanges, and Clearing Agents, with the objective to determine SFTR specific Best Practice for all existing Corporate Action types:

  • Agree industry booking models which enable SFTR compliant reporting.
  • Develop universal procedures for processing and communicating CAs across all Securities Finance Transaction asset classes and jurisdictions.

The SFTR Corporate Actions Working Group and its related analysis is being managed by James Langlois (SFTR Analyst), alongside Richard Colvill (SFTR Lead) and Adrian Dale (Director of Regulation & Market Practice).

The SFTR Corporate Actions Working Group has achieved through consensus agreement with its industry members the following:

Defining a Corporate Actions Universe

  • Formed a distinct list of all CAs, aligned with the ISO 15022 (SWIFT) and 20022 (STP) standards.
  • Determined attributes and effects of each CA on SFTs.

Stratifying the Corporate Actions into clusters by their effects on SFTs & booking models

  • Reviewed groups of CAs which can be processed similarly.
  • Confirmed CAs which have no material effect on SFTs.

In next week’s meeting (#5), we look forward to starting the Best Practice discussions for the first cluster of Corporate Actions: ‘Full or Partial Returns’.

Two further meetings per month are then planned through Q3 2019.  Specific issues highlighted to date which influence the future SFTR CA discussion include:

  • Unique Trade Identifier (UTI) generation for CA bookings
  • Trade Timestamp (and event date) matching for CA bookings
  • Fractional Rounding issue for non-cash dividends
  • Non-Tradeable Securities and other ineligible stock

It’s not too late to join!  ISLA encourages all member firms to participate in the SFTR Corporate Actions Working Group.  If you have any questions or would like to register your interest, then please contact James Langlois (james.langlois@isla.co.uk). Alternatively, for this and any other SFTR related enquiry, please email sftr@isla.co.uk.

Details of all SFTR working groups and streams can be found on the Working Groups page. Up-to-date meeting minutes, documents and external links can be found in the SFTR section of the site.

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