announcements1

WHAT IS ISO 20022?

ISO 20022 is a standard for developing financial services messages which provides the financial industry with a common language to capture business transactions and associated message flows. ISO 20022 includes both securities and payments messages within its scope, and is founded on modern data modeling techniques and business process analysis.

announcements1

WHAT IS ISO 20022?

ISO 20022 is a standard for developing financial services messages which provides the financial industry with a common language to capture business transactions and associated message flows. ISO 20022 includes both securities and payments messages within its scope, and is founded on modern data modeling techniques and business process analysis.

ISO 20022 Benefits

BENEFITS OF ISO 20022:

  • Flexibility – both in terms of its content and tailoring of output. As new corporate actions are developed, the messaging standard can change to meet the demands of the business, not the other way around.
  • XML Syntax – due to its widespread support, XML allows for easier processing and more efficient yearly maintenance.
  • Schema Validation – used to confirm that each data element is populated with a valid value.
  • Greater Straight-Through Processing (STP) – corporate action events will be announced using a data model that conforms to market practice, which also contains less narrative or “free text” and more fielded and tagged data.
  • Unique Corporate Action ID for Each Event – can be tracked through the life cycle of the event – from announcement, to election, entitlement, and payment.
  • Enhanced Data Elements – a more comprehensive and granular number of data elements, which allows for greater accuracy and, ultimately, less processing risk on the part of the customers.
  • Maintenance – the yearly standards process requires DTCC to constantly review, scrutinize and maintain its standard to ensure compliance with market practice. This in turn will lead to less ad hoc maintenance and instead institute a systematic approach to the business rules driving the file formats, not the other way around.
  • A Global Standard
    In defining a new model for U.S. and global corporate actions, DTCC worked closely with SWIFT, ISO 20022's registration authority. DTCC then worked with the Securities Markets Processing Group (SMPG) and the International Securities Association for Institutional Trade Communication (ISITC) to develop proposals for changes to the ISO 20022 standard as it related to corporate actions. These proposals were reviewed and approved by the Securities Standards Evaluation Group (CA SEG), a group of international industry experts who accept or reject changes to the ISO 20022 standard’s repository. DTCC then presented the proposals to the Corporate Actions Maintenance Working Group, a group that is responsible for all annual ISO standard release changes for evaluation and admission for the final country vote.

Perhaps the most important benefit to remember about adopting the ISO 20022 messaging standard is that it provides a common language, complete with its own ever growing dictionary, enabling businesses in the financial industry to communicate corporate action information quickly, easily and precisely. It offers consistent message standards across the industry.

Key Concepts

The ISO 20022 data model for corporate actions is aligned with the ISO standard and matches the ISO 20022 model closely, but there are a few differences, noted below.

  • A complex event is sometimes split into multiple events for processing purposes, such as the delivery of rights in a distribution event, followed by an elective event to exercise those rights.
  • The identification of the event is a key component in the ISO model. A corporate action identification number is issued by DTCC for each DTC-eligible event and will remain consistent throughout the life of the event. DTCC will provide this official reference number ONLY through an ISO 20022 message for DTC-eligible securities.
  • ISO 20022 uses its own set of event type codes to define the event and how it must be processed; in some cases the level of granularity is different from DTC function codes.
  • A critical data item for each event is the mandatory/voluntary indicator, which shows whether an event is mandatory without options, mandatory with options or voluntary.
  • ISO 20022 seeks, wherever possible, to avoid the use of narratives and free text; there will, however, still be occasions where data must be supplied in text form.


In the first generation DTC model, some complex events are defined using multiple "envelopes" and "function codes." The new model is able to define a single event with multiple options and payouts to account for the complexity of the event. In situations where the event is split into multiple events to facilitate processing, the events will be linked by reference.

Where the market itself defines multiple events, they are linked by reference in the new model. DTCC also provides the possibility, through the browser, to view related events for the same CUSIP or CUSIP family.

A comparison of the approach to multiple events is summarized below:

Feature Existing DTC Model The New  Model
Market defined single event Multiple envelopes and function codes represent a single event where complexity exists. Single event provides all details using multiple options and payouts to account for event complexity.
Market defined multiple events Linked through the use of text. Event linking provided dynamically via reference to the event identifier (Related Event ID) and link type describing association/ relationship. Related events (same CUSIP or CUSIP family) are displayed in the browser (not included in messages).
DTC defined multiple events Multiple events are processed through function and activity codes with linking verbiage in the comment text. To facilitate processes at DTC some events may be announced as multiple events. Those events will be linked via reference to the event identifier (Related Event ID) and link type describing association/ relationship.

The ISO 20022 data model includes a number of identifiers for an event. The Corporate Action Event Identification must be populated by any institution (data providers or account servicers) that sends announcement notifications. This identifier is then referenced in any further communication (replacement announcements, or subsequent processing) for that event by that institution.

In addition, the Official Corporate Action Event Identification (COAF) is a unique reference for the event, and is assigned by a designated body within each market. DTCC will publish the Official Corporate Action Event Identification on DTC eligible securities on its ISO 20022 messages. This new identifier will not be incorporated into legacy system files.

Where applicable, related events will be linked using the Corporate Action Event Identification. For example, the relevant Event Identifications will be listed on each event where two or more events should be taken together to understand a complete event, or where the events have a material impact on each other.

ISO market practice views information based upon the sender of the message (usually an Asset Servicer); therefore, two types of the message have been created to support the needs of the different roles DTCC plays. DTCC will issue announcements for corporate actions in two product types:

  • CSD Data: 
    The event data is being issued by DTCC in its role as a Central Securities Depository (CSD). The key data provided by DTC is in the core message with issuer of underlying security data extended as supplementary;
  • Market Data: 
    The event data is being announced by DTCC in its role as the provider of market data. The key data supplied by the issuer of the underlying security is in the core standard part of the message and DTC data extended as supplementary.

All of the data is the same in both products. For example, the record date is always provided by the issuer. But the key data mapping will vary depending on whether the event is being announced in the CSD product or the Market product. For example: if the event is a Cash Dividend, its payout data fields will contain DTC Cash Rate and Declared (Issuer) Gross Rate. In the CSD product, DTC Cash Rate will be mapped to the core standard part of the message and Declared Gross Rate will be extended as supplementary data. In the Market product, Declared Gross rate will be mapped to the core standard part of the message and DTC Cash Rate will be extended as supplementary data.

Clients and participants of DTCC will need to determine which version they wish to receive and select the appropriate message packages. Messages will be constructed on several building blocks including ‘core’ standard message mapping required (for processing) supplementary extensions. The illustration below depicts the principal composition:

b 0 0 0 00 images Asset Services careengineering new csd market data crp

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There are 7 key data elements that may take different values based on the variant selected by the participant. Each data element is provided in the message in both CSD and Market product. The following table lists the data elements and defines for each product whether the element can be found in the core message or in the extension.

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In most cases, the same options will be offered (announced and processed) by both the Issuer/Offeror and by DTC. However, on occasion, there will be options offered by the issuer that are not processed by DTC, while at other times it may be that DTC offers an option that is not offered by the issuer. The message will contain all known options for the scenarios outlined above. Each option will be 'flagged' if it is not processed by DTC or if it is not offered by the issuer. It is also possible that the default option differs depending on source of the option: DTC or Issuer. These will also be flagged where appropriate.

The following table summarizes the DTC and Issuer Options scenarios:

Option Scenario Issuer Supported
Option Flag
DTC Supported 
Option Flag
Remarks
Issuer offers the option. DTC supports (processes) the option. Y Y No special tag in the message. Option support by the Issuer and DTC is assumed unless specified otherwise.
Issuer offers the option. DTC does not support (process) the option. Y N Option Features element in the core message will have code NOSE to identify this scenario. Securities must be delivered out of DTC for participants wishing to take part in the specific event option.
Issuer does not offer the option. DTC supports (processes) the option. Y Y IssuerSupported flag in the extension will be set to "No." The option is not supported by the Issuer - only DTC participants can take part.


The following table summarizes the DTC and Issuer default Option scenarios:

Option Scenario Issuer Supported
Option Flag
DTC Supported 
Option Flag
Remarks
Issuer offers the option. DTC supports (processes) the option. Both DTC and Issuer announce it as the default option. Y Y

Applies to all DTC Participants and non-participants.

Note: Events with a single option are required to have a default option, even if a mandatory event, per ISO standards.

Issuer offers the option. DTC supports (processes) the option, but announces different options as the default (DTC DRIP). N/Y Y/N Applies to DTC Participants only.
DTC does not support Issuer's Default Option. Y N/A Applies to DTC Participants only.
DTC has an additional option (that Issuer does not offer) that option is designated as default at DTC. N/A Y Applies to DTC Participants only.

The primary creators of corporate action content are the issuer/agent, depository and the stock exchange. DTCC’s data model, and to some extent ISO, accommodates the different owners of the information either explicitly or implicitly. While the ‘ownership’ of specific data elements is mostly straightforward, there are some concepts that DTCC will differentiate, as DTC data and Issuer data are not noted as such in the ISO model.

The following table provides a summary on Data Element Ownership:

Scenario Details Example
DTC Only Information Information that is created by DTC in its capacity as the
Depository for DTC eligible securities or for DTC specific
services.The data element will be prefaced by DTC.

DTC Last Day for Deposit

DTC Chill Release Date for Deposit

Issuer Only Information Information only supplied by the issuer.Does not have specific notation.

Record date

Proration date

Stock Exchange Only Information

Information only supplied by the stock exchange.

Does not have specific notation.

Ex-date
DTC and Issuer Data Elements Similar information that both the issuer and DTC provide.
Custodian data is usually prefaced by ‘DTC’ and the issuer by ‘Declared’ or ‘Actual’.

Actual Expiration Date

Declared Cash Rate

DTC Instruction Expiration Date

DTC Cash Rate

 

The DTCC corporate actions data model is aligned with ISO. There are, however, differences in the representation. This section will explain the relationship between the two models using a corporate actions announcement as an example.

The DTCC Corporate Action Model has several "levels" (noted in the diagram below in blue rectangular boxes e.g. Event, Certificate, Option, etc.). The levels are associated with ISO Corporate Action Notifications either directly or based on a condition (noted in diamond shapes). The multiplicity (noted using UML notation as 0...1, 0...*) is displayed for levels and message building blocks, as well as for associations between the DTCC levels and the ISO message building blocks or components.

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Structurally, a corporate action consists of a number of data levels, a hierarchy of logical groups that contain related information. The main data levels are:

  • Event level: data that applies to the entire corporate action, such as the event type, and mandatory/voluntary indicator; the level is mandatory and non-repetitive
  • Option level: data that applies to a single option only, such as the option number, option type, and whether the option is supported by DTC and/or the issuer. Note that in the ISO 20022 data model, even a mandatory event with a single payout is defined as having one option
  • Payout level: data for each payout such as the identity of the outturn security or the rate of the security or cash payout; there may be one or more payouts per option; payout levels are distinguished by a payout number (sequential order) and payout type.

These data levels are also built into the structure of the extension component. Where there are DTCC data elements not included in the ISO message structure, the element is placed in the structured extension at the appropriate level. For repetitive levels such as option or payout, it is possible to identify to which instance of the data the extended element belongs.

The reengineered platform employs ISO 20022 messaging and a browser-based Graphical User Interface (GUI). Messages will be transported via either the DTCC SMART or the SWIFT network, with the following protocols:

  • SMART (DTCC Proprietary Network)
    • MQ
    • NDM
    • FTP
  • SWIFT
    • InterAct Store and Forward
    • FileAct

SMART

Participants considering the SMART network should contact their DTCC Relationship Manager to determine if they have a SMART circuit currently in place. If so, DTCC will perform bandwidth utilization studies on the current lines to determine if an upgrade to a larger circuit is necessary. There is no cost for transmitting messages via SMART, but participants do have to pay for the circuit itself. Pricing – which is a direct pass-through from the telephone company servicing the line – is fixed based on circuit size. For more information, please refer to the SMART Network Fee Structure.

SWIFT

Participants considering the SWIFT network should contact their SWIFT Relationship Manager for provisioning and pricing details.

This information is also available in the Getting Started section of the Learning Center.

Click Next (below) to continue.

Message subscriptions are available to enable participants to control the flow of data to them. Subscription options exist for three main event groups – Distributions, Reorganizations, and Redemptions. Announcements are broken down into eight specific event groups for which subscriptions can be separately specified. The event groups are:

  1. Distributions
  2. Factors
  3. Municipals Update
  4. Municipals New
  5. Redemptions
  6. Maturity (Cash)
  7. Reorganizations
  8. Meetings

Participants can choose:

  • The timing and frequency of announcements, for example, real-time throughout the day, end of day or at specific times during the day
  • How some data fields are populated through content subscriptions
  • To receive events based on "final" or "non-final" (that is, incomplete) workflow statuses.

For in-depth information about subscription options and message timing, see Subscription Options in the "Choosing a Network" section of the Learning Center.


Choosing a Network

DTCC Corporate Actions messages ISO 20022 messages will be transported using one of two networks:

Messaging Options SMART Network SWIFT Network
All Messages Real Time MQ  InterAct Store and Forward
Batch Slices / 
End of Day Files
NDM/FTP  FileAct

 

Customers considering using the SMART network should contact their DTCC Relationship Manager to determine if they have a SMART circuit currently in place. If so, DTCC will perform bandwidth utilization studies on the current lines to determine if an upgrade to a larger circuit is necessary. There is no cost for transmitting messages via SMART, but customers do have to pay for the circuit itself. Pricing – which is a direct pass-through from the telephone company servicing the line – is fixed based on circuit size.

SWIFT

Customers considering the SWIFT network should contact their SWIFT Relationship Manager for provisioning and pricing details.

Ultimately, these communication methods will allow DTCC clients to benefit from:

  • Increased availability and timeliness for corporate actions data: Customers will benefit from the enhanced processing engine that allows for corporate action messages to be updated and published throughout the day. Updates will be applied to existing events at intervals for dissemination.
  • Subscriptions: Subscription options exist for eight different event groups, enabling participants to choose to receive messages intra-day or end of day using various message protocols, depending on the urgency of the event.

Documentation

Data Dictionary