Fund managers will soon be able to respond to corporate actions on the same business day rather than having to cope with the current 24-hour lag, says BNP Paribas Securities Services.
Speaking in Sydney this week, BNP Paribas Securities Services head of Australia and New Zealand, David Braga, said that custodians are the first point of contact for corporate actions.
“Because we’re the registered owner of the asset, when corporate events get notified, that notification comes to us,” Mr Braga said.
Part of the process for the custodian is “pulling apart” the notification – whether it’s about a merger, a dividend payment or a tender offer – and relaying that information to clients, that is, fund managers.
“Because of the aggregation that exists at the moment, that process has all sorts of internal controls to make sure we give the right information to the right people,” Mr Braga said.
“As we pull that apart, we can take away some of those internal processes because they’re not needed anymore.
“We can just pass the information straight through from the market to the end recipient who is the fund manager,” he said.
As a result, the funds management industry will be able to move away from the current one-day lag for corporate action notification.
“In future, we’ll be able to go to a plus 8 hours or minus 8 hours,” Mr Braga said.
“So if the event comes out at 9am this morning, we’ll get that event notification to you the same day.
“And if the cut-off time is 5pm in the evening, we’ll be able to take your decision later in the processing day,” he said.
The shorter turnaround times for corporate actions have obvious benefits for fund managers, Mr Braga said.
“While we’re dealing with an environment where there is so much instability and uncertainty, to have more time with the right information to hand to make the decision you want to make is the net benefit we’re looking to provide to fund managers,” he said.
“This is something that we believe is a unique opportunity that we can provide to our clients that is harder for our competitors because of the nature of their business. There will be some competitors that can’t do it, and for others it will be hard to do.”
BNP Paribas Securities Services’ same-day processing of corporate actions is currently live for the Australian market, and it is being rolled out across the custodian’s proprietary network.