It was announced yesterday that from January 2005, the Tokyo Stock Exchange (TSE) will become the first Asian stock exchange to disseminate corporate action information through SWIFTNet. The move comes as the exchange seeks to get more international investors and issuers participating in its exchange.
"SWIFT is worldwide and so this means we can get more information to more global users," said Tomoyoshi Uranishi, executive officer of the TSE at Sibos yesterday.
Corporate action data is one of the key differentiating factors between exchanges around the world. As more companies seek dual listings, and in particular more Chinese companies seek to list overseas, the ability of an exchange to get that corporate data out to as many stakeholders and shareholders as possible is a powerful competitive tool.
"Stock exchanges were bureaucracies but they have become much more commercially minded," says Ian Buckley, SWIFT's Asian head of the securities industry division. "The adoption of corporate action messaging through SWIFTNet is a part of this. It enhances their value proposition to their community, attracting more listings, more investors and more capital."
In a recent study by the Oxera Group carried out with the DTCC in the US, it was found that between Eur1.8 billion and Eur8 billion was lost annually by the opportunities missed by investors due to not receiving good corporate action data. "Corporate actions are not a back office issue," said Jim Femia of the DTCC. "They impact front office trading actions and the failure to act has a huge impact."
Corporate action messaging is also seen as a crucial part of the drive to STP. The TSE has been sending out corporate actions through its Tokyo Market Information system since 2001. Since the beginning it has been sending out this information in the standard ISO15022 format which helps the receivers of that information interact with it electronically.
"TSE, as the very source of corporate action information for Japanese companies, has a vision beyond commercial data distribution through SWIFTNet," said Uranishi. "We are further looking forward to contributing in STP of the financial industry. We recognize our participation in SWIFT as a step in standardizing the format of corporate action data and increasing the efficiency of data flow in the financial industry."
According to industry participants, the main hurdle to getting full standardization of corporate messaging is getting the corporates or the issuers to put their action messages in the standard format right from the beginning. Often it is left to the exchanges to muddle through the reams of legalese, assigning the relevant information to the relevant fields in the action message. For complex actions, the temptation is to just leave it well alone as the costs and risks of getting it wrong are too great and send it out as an annex.
"It is very difficult to ask issuers to put the data into one standard: the stock exchange has to be the catalyst," said Uranishi. "In the future it would be desirable for issuers to do it but at the moment the stock exchanges ourselves must do so. "
However, according to Uranishi relatively common corporate actions announcements can and have been standardized. These are in areas such as dividends, rights issues, bonus issues, mergers, equity swaps, reverse stock splits, AGM schedules, name changes and public offerings. Listed companies do not have to pay for these announcements on the TSE; the exchange effectively subsidizes the companies' IR activities as a value added service it can offer to its listed companies.
However, next year, the TSE will begin an electronic proxy voting service for which Uranishi says listed companies will be asked to pay.