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Corporate Action Reengineering BDUG Conference October 18 th 2006

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

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Corporate Action Reengineering BDUG Conference October 18 th 2006

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  1. Corporate Action Reengineering BDUG Conference October 18th 2006

  2. 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

  3. 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

  4. 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

  5. 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

  6. 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

  7. 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

  8. Corporate Action Processing and Announcements

  9. 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

  10. 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

  11. 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

  12. 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

  13. 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

  14. 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

  15. Corporate Action Announcements - @Source2007 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

  16. @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

  17. 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

  18. 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

  19. 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

  20. 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.

  21. 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

  22. 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</>

  23. A side by side example of a Cash Dividend in XML and ISO15022 XML Version ISO15022 Version Event Type Record Date Non ISO Field Placed in Tag 70E ‘General Details’ (Seq. D) Option Rate

  24. Unsupported Files in ISO Format published in XML

  25. Questions?

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