Corporate Actions Trip Up STP According to TowerGroup Research

An integral part of today's capital markets, corporate actions processing remains the largest stumbling block to the financial services industry's attempt at realizing straight-through processing (STP), according to a new research note from TowerGroup (Needham, Mass.). Citing the industry's failure to adopt standards, the consultancy argues that processing corporate actions (e.g., mergers, dividend payments, takeovers, rights issues, etc.) remains manually intensive and thus laden with risk and operational inefficiency, which can be made worse by regional variations, customs and practices. As a result, TowerGroup predicts that industry spending on systems to automate corporate actions will increase steadily from $75 million by the end of 2006 to $121 million in 2010.

Still, despite the increased investment, TowerGroup believes the financial services industry won't address the problem in earnest until regulators shine their spotlight on the issue. According to TowerGroup, however, corporate actions are unlikely to draw regulatory attention unless some watershed event were to occur, such as a sizable and public loss by a securities firm. Until then, competing projects, particularly those with regulatory implications, will continue to demand firms' resource and budget allocations. <<<