From the Eurosystem’s perspective, safe and efficient financial market infrastructures are essential for the reliable transfer of funds and securities, the smooth implementation of monetary policy and financial stability. The Eurosystem, among other things, supports further integration of infrastructures for securities and collateral management, post-trade services and corporate actions in the Europe and for that purpose is engaging in a dialogue with market participants. The Advisory Group on Market Infrastructures for Securities and Collateral (AMI-SeCo) assists the Eurosystem in fulfilling its tasks in the area of financial infrastructures operating in the euro area, in particular by supporting harmonisation of financial markets in accordance with the common rules, procedures and standards established by the AMI-SeCo.
Harmonisation in the area of securities settlement is followed by harmonisation in the processing of corporate actions and meetings.
AMI-SeCo has set itself the goal to harmonise processes related to corporate actions (CA) according to the ISO Standard 20022. Areas of harmonization were identified in December 2017, and consequently the SCoRE standards for corporate events were defined in 2019.
The SCoRE CA Standards are intended to facilitate the consistent and timely implementation of harmonized business processes and workflows for processing of CAs and meetings in the AMI-SeCo markets. The standards lay down harmonized rules for the exchange of information between all parties in the custody chain. The standards focus on CA events, including general meetings and bondholder meetings identified as relevant for securities issued by CSDs in Europe, and cover all types of instruments (i.e. debt instruments, equities and investment funds). The SCoRE CA standards aim to fully clarify the scope of CA events and meetings that can be executed in connection with securities issued in the Europe and to document harmonised business processes, workflows, data elements and messages that need to be supported by all relevant stakeholders in the custody chain when processing these events.
SCoRE CA standards should be implemented by all actors involved in CA processing. Implementation of Standards 1 to 14 is mandatory for all actors by April 2024, except for those actions that are considered relevant only for non-debt instruments, as part of Standards 2 and 3, and for which the deadline is November 2025. As regards Standard 15 – Application of ISO 20022 – a two-wave approach has been agreed. In wave 1, CSDs, the Eurosystem’s central banks and the Eurosystem counterparties will implement ISO 20022 messaging by April 2024. Other actors involved in processing of Cas and meetings will adopt ISO 20022 messaging later on, as part of the wave 2, which has implementation deadline of November 2025.
There are 15 common harmonisation standards that apply to all 62 types of corporate actions:
- Harmonised business processes and workflows for corporate actions
- Provision of data necessary for calculating proceeds
- Consistency of information provided by depositaries and custodians
- Rounding rules
- Negative cash flows
- Business day rules
- Securities amount data
- Rules for payment time
- Rules for notification of CA processing status
- Rules for elective events
- Availability of default options
- Rules for meeting events fees
- Reversal of a corporate action
- Rules for processing of foreign currency payments
- Application of ISO 20022 messages for corporate actions
For both CSD participants and capital market participants, the harmonisation of corporate actions processing has a number of benefits. The execution of corporate actions through a CSD in cooperation with the participants reinforces the membership principle and provides the possibility for more participants to provide new services related to local security issues, e.g. payment of proceeds. Harmonisation of processing of corporate actions related to domestic securities with procedures applied to the foreign securities will allow participants that currently provide the full range of corporate actions for the foreign securities, to reduce cost for providing these services. The harmonisation will bring higher comfort to holders of domestic securities as they will receive all services related to securities ownership in one place through one service provider – a participant with whom they have an owner account opened. For issuers it will be simpler and more cost-effective to place a security issue abroad thanks to the same procedures for servicing the issue. Last but not least, the harmonisation of corporate actions processing of domestic security issues will contribute to greater integration of the Slovak capital market into the EU single capital market, allowing issuers and investors to benefit from all the advantages of the common capital market.
Author: Ľubomír Demčák
