CORP/CAON - SMPG



Corporate action reference and option numbering market practice

Status: Draft v3.6

Final date:

Update date: 28th March 2007

Author: SMPG

I. Scope: 3

II. Corporate Action Reference: 3

A. Proposal 3

III. Corporate Action Option Number 3

A. Proposal 3

|Changes to previous versions |

|13 Oct 2006 |V3.4a |Updates from SMPG review in Sydney |Karla McKenna |

|14 December 2006 |V3.5 |Updates from SMPG telco |Karla McKenna |

|28th March 2007 |V3.6b |Updates from SMPG review in Amsterdam |Karla McKenna |

Scope:

Since the creation of the ISO 15022 corporate action messages, the industry has been confronted to the lack of standards for the referencing of corporate action events and the numbering of corporate action options.

At the April 2006 Stockholm meeting, the SMPG Corporate Action working group mandated SWIFT Standards to come up with a proposal to be discussed by the group.

This document presents a solution proposal as a basis for discussion. SWIFT Standards was cautious about making sure this would be a realistic approach with as limited impact as possible on the existing agreed practices and current implementations.

It is understood that there might be complex events or specific scenarios when this proposal will not work. It is however considered a sufficient improvement compared to today’s situation to be implemented by the industry.

We encourage the reader to evaluate this proposal solely as CA and ISO 15022 experts. They should forget about their existing implementation as inevitably, this proposal will not match the current implementation of most institutions.

This document is based on SR 2006. For more details on the messages and fields, please refer to the standards user hand books.

Corporate Action Reference:

1 Proposal

- Keep the existing CORP reference in the Corporate Actions messages but rename it ‘Corporate Action Processing Identifier’.

- Add a new field 20C reference and name it ‘Official Corporate Action Event Reference’. This new reference should be an optional field assigned by an official central body/entity within a given market. Each market will determine if an official central body/entity exists in the market to assign this official reference and will designate this central body/entity to assign these official references.

- The official reference will be assigned once by the official central body/entity at the beginning of a corporate action event. All recipients of this official corporate action event reference should include this reference in all messaging associated with an event.

- The official reference will be unique to each corporate action event. The official central body/entity within each market will decide upon the components that make up the official reference in each market.

- As the new field will be optional, those markets that cannot identify or cannot participate in this proposed market practice will send messages without this new field.

- The home market for each security should assign the official references for events involving each home market security.

- To avoid assignment of duplicate numbers globally, the ‘Official Corporate Action Event Reference’ should contain a 2-character alpha code unique to the official body assigning the number as the first 2 positions of the reference. The 2-character ISO country code should not be used for this purpose as more than one official body can exist for a market.

- The Latin character set (0-9 and Latin uppercase (A-Z)) should be used for this 2-character code.

- SMPG will vet the use of the 2-character codes for uniqueness.

Corporate Action Option Number

The proposal addresses the numbering and order of appearance of corporate action options for a corporate action event to achieve as much consistency as possible across different senders of messages.

1 Proposal

- Each corporate action option identification within an event should be considered and processed as a combination of the Field 13A, Number Identification, CA Option Number (CAON) and the field 22F Corporate Action Option (CAOP).

- Field 13A, Number Identification, CA Option Number (CAON) will be numbered as follows to distinguish among multiple instances of the same options and to distinguish between market announced and account servicer announced options.

o Multiple instances of the same option should follow the option order rules that appear in the table below.

o The first instance of each market announced option should be assigned a CAON of 001. Multiple instances of the same market announced options should increase sequentially – 002, 003, etc.

o Account servicer announced options should begin with the digit ‘9’ and should be sequentially numbered (901, 902, etc.)

This approach insures that all market announced options are numbered and announced by consistent CAON and CAOP combinations and the account servicer options are identified separately.

The approach also eliminates the ‘positional’ logic for options (i.e., CASH does not have to appear first in the list of options).

Example 01:

A dividend payment has CASH options for two currencies, euro and USD. In this case, the options follow the order rule (If different currencies, then by alphabetical order of market announced currencies , (followed by account servicer offered currencies in alphabetical order)).

1st option (market announced)

13A::CAON//001

22F::CAOP//CASH

92F::GRSS//EUR2,00

2nd option (market announced)

13A::CAON//002

22F::CAOP//CASH

92F::GRSS//USD1,25

3rd option (account servicer announced)

13A::CAON//901

22F::CAOP//CASH

92F::GRSS//CAD1,50

|Option Code |Option order rule |

|CASH |Cash |If different currencies, then by alphabetical order of market announced |

| | |currencies (followed by account servicer offered currencies in alphabetical |

| | |order). Else, from highest event main price up. Else, from highest event main |

| | |rate down. Else, in the order announced by market. |

|SECU |Securities Option |If different securities, then by alpha-numerical order of security ID. If no |

| | |ISIN, from highest event main price/rate up. Else, in the order announced by |

| | |market. |

|CASE |Cash and Securities |CASH order rule. Else SECU order rule. |

|LAPS |Lapse |Order rule does not apply. Should always be 001. |

|NOAC |No Action |Order rule does not apply. Should always be 901. |

|SLLE |Sell Entitlement |SECU order rule. |

|BUYA |Buy Up |SECU order rule. |

|EXER |Exercise |SECU order rule. |

|OVER |Oversubscribe |SECU order rule. |

|144A |Rule 144A |SECU order rule. |

|ABST |Abstain |If different resolutions/proposals, then by market announced |

| | |resolution/proposal number. Else, by alphabetical order to market announced |

| | |resolution/proposal text. |

|AMGT |Vote Against Management |ABST order rule. |

|ATCH |Attach |SECU order rule. |

|BEAR |Bearer Share Exchange |SECU order rule. |

|BSPL |Bonus Share Plan |SECU order rule. |

|CEXC |Consent and Exchange |ABST order rule. |

|CONN |Consent Denied |ABST order rule. |

|CONV |Convert |SECU order rule. |

|CONY |Consent Granted |ABST order rule. |

|CTEN |Consent and Tender |ABST order rule. Else SECU order rule. |

|DETH |Detach |SECU order rule. |

|MNGT |Vote With Management |ABST order rule. |

|MPUT |Mandatory Put with a Right |SECU order rule. |

|OFFR |Proposed rate |If multiple proposed rates, then from highest rate up. Else, in the order |

| | |announced by market. |

|OTHR |Other |CASH order rule. Else SECU order rule. |

|PROX |Proxy Card |ABST order rule. |

|REGD |Registered Share Exchange |SECU order rule. |

|REGS |Regulation S Exchange |SECU order rule. |

|SPLI |Split Instruction |ABST order rule. |

For options that have both cash and securities components using the CASH and SECU option, the CASH order rule should take precedence in ordering the options .

The currency designation can be normally be found either in field 19 (Amount) and field 11A (Currency).  Alternatively the currency can be found in fields 90B and 92B/92F.

If a market announced option is announced after an event announcement message has been sent, the new option should be added as the next option. Do not reorder options (will result in the least impact).

Example 02:

A dividend payment has CASH options for two currencies, euro and USD, originally announced by the market and the account servicer has added a third option of CAD. Further to the original announcement, the market announces a third currency option, GBP.

1st option (market announced)

13A::CAON//001

22F::CAOP//CASH

92F::GRSS//EUR2,00

2nd option (market announced)

13A::CAON//002

22F::CAOP//CASH

92F::GRSS//USD1,25

3rd option (account servicer announced)

13A::CAON//901

22F::CAOP//CASH

92F::GRSS//CAD1,50

At this stage in the event, GBP, although it is a market announced option, is added as the last option, 003. The existing options retain their original CAONs and are not renumbered.

1st option (market announced)

13A::CAON//001

22F::CAOP//CASH

92F::GRSS//EUR2,00

2nd option (market announced)

13A::CAON//002

22F::CAOP//CASH

92F::GRSS//USD1,25

3rd option (account servicer announced)

13A::CAON//901

22F::CAOP//CASH

92F::GRSS//CAD1,50

4th option (market announced)

13A::CAON//003

22F::CAOP//CASH

92F::GRSS//GBP1,00

Example 03:

An offer originally is announced with the following options, to take cash, to take securities and to take both cash and securities.

1st option (market announced)

13A::CAON//001

22F::CAOP//CASH

90D::OFFR//ACTU/GBP3,20

2nd option (market announced)

13A::CAON//001

22F::CAOP//SECU

92D::NEWO//2,/1,

3rd option (account servicer announced)

13A::CAON//901

22F::CAOP//CASE

92D::NEWO//1,/1,

90D::OFFR//ACTU/GBP1,0

After the original announcement, the market adds a second SECU option. The existing options are not renumbered. The second SECU option is added as the next option number in the SECU order.

1st option (market announced)

13A::CAON//001

22F::CAOP//CASH

90D::OFFR//ACTU/GBP3,20

2nd option (market announced)

13A::CAON//001

22F::CAOP//SECU

35B::ISIN1

92D::NEWO//2,/1,

3rd option (servicer announced)

13A::CAON//901

22F::CAOP//CASE

92D::NEWO//1,/1,

90D::OFFR//ACTU/GBP1,0

4th option (market announced)

13A::CAON//002

22F::CAOP//SECU

35B::ISIN2

92D::NEWO//2,/1,

In addition, with SR2007, there will be the capability to indicate inactive or cancelled status for affected options.

This will be done by adding the new 22F indicator, OSTA Option Status, with the following codes, to inactive or cancelled options.

22F::OSTA//INTV Inactive or 22F::OSTA//CANC

Example 04:

An offer originally is announced with the following options, to take cash, to take securities and to take both cash and securities.

1st option (market announced)

13A::CAON//001

22F::CAOP//CASH

90D::OFFR//ACTU/GBP3,20

2nd option (market announced)

13A::CAON//001

22F::CAOP//SECU

92D::NEWO//2,/1,

3rd option (account servicer announced)

13A::CAON//901

22F::CAOP//CASE

92D::NEWO//1,/1,

90D::OFFR//ACTU/GBP1,0

The CASE option is eliminated during the event.

1st option (market announced)

13A::CAON//001

22F::CAOP//CASH

90D::OFFR//ACTU/GBP3,20

2nd option (market announced)

13A::CAON//001

22F::CAOP//SECU

92D::NEWO//2,/1,

3rd option (account servicer announced)

13A::CAON//901

22F::CAOP//CASE

22F::OSTA//CANC

92D::NEWO//1,/1,

90D::OFFR//ACTU/GBP1,0

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