Exclusive Online Only ContentXBRL US, Swift and DTCC Work on XBRL Tagging for Corporate Actions
June 3, 2009
XBRL International’s U.S branch, messaging consortium Swift, and Depository Trust & Clearing Corp. (DTCC) have officially set a timetable to jointly create a taxonomy for U.S. corporate issuers to use in tagging corporate actions in the extensible business reporting language format.
The taxonomy, which will be made publicly available by the end of next year, will subsequently make it easier for financial intermediaries – banks and brokerages -- to translate corporate action data from the extensible business reporting language (XBRL) formats to the International Organization for Standardization (ISO) compliant 20022 message types.
“The tagging of the corporate action information contained in the prospectus, press release or letter of transmittal will be undertaken by the issuer or their agent using XBRL in accordance with the new ISO 20022 global standard,” explained David Hands, director of global corporate actions at DTCC. “The tagged fields will be embedded within the .pdf or .doc document, enabling them to be easily extracted.”
DTCC will issue a unique identifier for each corporate action that will remain with the event throughout its lifecycle, regardless of how many times the event is updated, Hands said.
XBRL US, Swift and DTCC have been in talks about the new initiative for over a year and are represented on the board of XBRL US. Swift is set to begin testing the new ISO 20022 messages next year and introduce them to member firms at the end of 2010 with the goal of replacing all of its old formats by 2015. DTCC sends its customers about 200,000 corporate action notifications each year, not including information on scheduled events such as bond interest payments.
DTCC, the U.S. umbrella organization for clearance and settlement, has agreed to switch from proprietary message formats to ISO 20022 compliant message types by 2015.
The goal of the initiative among XBRL US, Swift and DTCC is to reduce the potential difficulties – and larger risks – that market infrastructures and financial intermediaries face in reinterpreting information on corporate events because of inconsistent descriptions from issuers. Intermediaries are financially liable if they give clients bad data on corporate action notifications or provide it too late for a decision to be reached. About 200,000 corporate actions, such as dividends, bond redemptions, rights offerings and mergers are announced each year by publicly traded companies in the U.S.
“Based on the information in the taxonomy it won’t be difficult for issuers or their agents to create the tags and for financial intermediaries to convert them into ISO 20022 message types,” said Malene McMahon, senior business manager for standards at Swift. Some of the taxonomies used for financial reporting could also be used for corporate action events, she added.
Despite the merits of using XBRL tags for corporate actions, its uptake remains to be seen. Issuers may not be eager to carry the costs or potential liabilities of changing their current practice of simply including corporate action notifications in offering documents, without a requirement from the Securities and Exchange Commission.
“We face an education program in convincing issuers of the merits of XBRL tagging in corporate actions and are looking to financial intermediaries to help out,” said McMahon. Swift’s current ISO 15022 message types do not allow for tagging at the source of the information while ISO 20022 messages do.
Although, financial intermediaries can send ISO-compliant messages through proprietary or public networks, Swift is eager to promote its network. So far, small to mid-sized U.S. broker dealers and custodian banks have lagged behind larger global firms in joining the Swift network or using older ISO 15022 messages in the corporate actions arena.
