Corporate actions are crucial to maintaining the data needs for various core functions, such as analytics, risk systems, order management systems, accounting systems, and others. However, keeping up with corporate actions can be a challenge. This stems from the demand for more corporate action data delivered faster and growing market pressures looking at corporate actions’ impact on trading, analytics, and compliance workflows.

It is not that the challenges around corporate actions have been ignored — far from it, as evidenced by global standardization efforts and continuously expanding data offerings demanded by users. However, being aware of and readily solving these challenges is easier said than done. Corporate actions span a vast and diverse array of activities and events demanding an assortment of data — just as diverse — from an ever-growing pool of entities, securities, and geographies. As a result, corporate actions require significant manual processing and intervention to ensure they are accurate and actionable for the firms relying on this information. 

To understand how complex this data is, Bloomberg’s corporate actions data provides global coverage spanning over 50 event types across asset classes and sourcing from thousands of daily sources, resulting in over 1 million related actions added annually. Bloomberg uses a combination of technology and specialized global corporate action analysts who “follow the sun” to review multiple sources, reconcile discrepancies, and deliver data promptly and accurately to clients. 

This article focuses on the value of corporate actions and the intuitive data tools firms can use to help streamline tracking corporate actions worldwide. 

Why grapple with corporate actions?

The variety and diversity of sources and actions create a data quality and management challenge for even the most skilled Chief Data Officers (CDOs). It requires assistance from business experts across the spectrum — from traders to operations, compliance, analysts, and even servicers. 

The impact of corporate actions runs up and down the trade lifecycle. Traders must consider pending actions in their pricing decisions and decisions to buy and sell, making fast, high-quality information critical. Meanwhile, operation teams must account for the location of a given stock, such as collecting announcements from various sources in multiple local jurisdictions with potentially conflicting regulatory rules. Investors must consider their options in holding or selling based on ex-dates, inflight trades, position realignments, and valuations. And these are just some of the basic activities that occur based on corporate actions events.

Using consistent identifiers to track corporate actions

To help navigate the complex world of corporate actions, it begins with identifying the underlying financial instrument or entity. This can be tricky because multiple identifiers may exist for a single financial instrument or entity based on function, local needs, regulatory requirements, and other variables. 

This is especially true for equities traded globally. Consistently identifying positions in a single stock that may be spread across different jurisdictions, currencies, depositories, and local agents or sub-custodians that a single event may impact, is critical to effectively and accurately managing events.

To circumvent this confusion, a strong interoperable instrument master and corporate structure database is necessary.  Open data tools such as the Financial Instrument Global Identifier (FIGI) assist in creating this interoperability by linking the different instrument identification systems that may be used in corporate actions announcements. FIGIs are unique, nonchanging, and perpetual identifiers that link material changes — such as corporate actions and other events — to a given instrument, maintain permanent association with those changes, and provide a consistent historical perspective so nothing gets lost over time. This method allows the integration of existing and future content sets with corporate actions and streamlines workflows.

In the same spirit, Legal Entity Identifiers (LEIs) can identify legal entities subject to corporate actions, such as mutual funds, government entities, corporations, and more. This is particularly valuable because it helps streamline onboarding processes and further facilitates effective Know Your Client (KYC) practices. Additionally,  LEIs allow integration with services that provide corporate hierarchies that tie to a firm’s instrument databases so you can better understand your exposure to a single entity.

Using consistent identifiers such as FIGIs and LEIs makes integrating corporate action event announcements into an order management system like Bloomberg AIM much simpler. Given their unchanging nature, FIGIs streamline aggregating an action announced across multiple local identifiers and identifying positions split across various jurisdictions. This enables the order management system to create transparency across accounts by easily collecting and aggregating that event throughout accounts, account groups, and the overall firm positions. 

The path to better corporate action data starts with foundational elements that create interoperability between instrument and entity identifiers. This frees up time, so the focus is on taking action with corporate action events instead of just trying to access the notifications in the first place.

About the Authors

Richard Robinson is Chief Strategist, Open Data and Standards, at Bloomberg. He works with regulators, legislators, and industry leaders worldwide, addressing data standards issues to create more efficient and transparent markets. Robinson has over 30 years of experience in the financial services industry. He has held leadership positions at major global custodian banks, brokerages, and industry utilities, leading transformative projects in data, operations workflow, and messaging.

Maureen Gallagher is the Global Head of Enterprise Reference Data at Bloomberg. Gallagher supports clients globally in using this foundational data to feed their operational workflows and inform their decision making across the enterprise.  In early 2021, Gallagher was appointed Head of Enterprise Reference Data, a top revenue-producing business.