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INVESTMENT BANKING | Contributed Content, Singapore
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Madalene Soon

Banks in Asia Pacific can reduce risk by embracing intra-day data

BY MADALENE SOON

Banks in Asia Pacific have traditionally processed corporate actions on an end-of-day or even a T+1 basis but due to market and regulatory changes, are looking to move to an intra-day process.

However, moving to intra-day is not a case of replacing end-of-day processes with one or two updates; firms, driven by different pressures, are looking to receive event notification as soon as announcement are made in the market.

Take custodian banks for example, they are under pressure to differentiate their service offering in what is a highly competitive, low margin business. They want timelier notifications based on when an event is announced, rather than using the ex-date as a benchmark, to provide a bigger decision making window and deliver more value-added services to clients.

Changing consumption within firms is also driving this evolution and Exchanges in the region, such as ASX and SGX, have reacted to this by offering intra-day event dissemination.

While the front office has traditionally not been seen as a heavy consumer of corporate actions information, the data encompasses risks found across the breadth of a financial institution. With heightened risk management requirements and investors seeking reassurance that the value of their portfolios is constantly being monitored for the implications of events, there has been a shift in the way that corporate actions data is used across the enterprise.

For the middle and front-office functions the traditional batch file process is not fit for purpose. They need to incorporate corporate actions information into and across their risk management, product control, investment decisions and trading strategies.

Therefore timely, high-quality corporate actions data is required for the front office to make better-informed trading and investment analysis and decision making; it helps support global investment strategies, reduces interpretation errors and benefits the monitoring of accounts and positions.

Corporate actions can also have a direct impact on whether trading strategies are in or out of compliance with a specific customer mandate, especially as mandates have become increasingly complex. Corporate actions that affect stock prices need to be anticipated and stored for the purposes of compliance, valuation and analysis.

So while the usage requirements of corporate actions data have evolved significantly, the processes for dealing with them have not. At the same time, demands for improved risk management have added to the need for more timely information on corporate actions in order to understand the impact of events on liquidity and risk exposures.

This requires a major shift towards a near-time, event-driven operating model and away from traditional end-of-day batch-oriented processing. Corporate actions data delivered intra-day enables firms to speed up decision making and benefits both pre- and post-trade analysis with comprehensive global content that can be delivered on demand to end clients.

That evolution is already taking place: banks in Asia that have historically run end-of-day batch data processes are already moving to intra-day processing, demanding near real-time data in order to more efficiently monitor positions, gain a near-time view of exposures, and feed downstream risk management systems.

This new intra-day approach can benefit participants throughout the financial industry. Investors will benefit from faster, more accurate data enabling them to make informed decisions with a wider decision-making window, while issuers will benefit from the knowledge that their message is accurately communicated in an effective manner, improving transparency and reducing latency between issuer and investor.

The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Asian Banking & Finance. The author was not remunerated for this article.

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Madalene Soon

Madalene Soon

Madalene Soon is business manager, reference data at Interactive Data (Asia) based in Singapore. She focuses on the reference data market in Asia Pacific and product development strategy for the region.

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