Corporate Actions: A Guide to Securities Event Management (The Wiley Finance Series)

430 Pages·2006·2.01 MB·English

by  Michael Simmons

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Corporate Actions
A Guide to Securities Event Management
Michael Simmons and Elaine Dalgleish
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Corporate Actions
i
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ForothertitlesintheWileyFinanceSeries
pleaseseewww.wiley.com/finance
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Corporate Actions
A Guide to Securities Event Management
Michael Simmons and Elaine Dalgleish
iii
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LibraryofCongressCataloging-in-PublicationData
Simmons,Michael,1951–
Corporateactions:aguidetosecuritieseventmanagement/
MichaelSimmons&ElaineDalgleish.
p. cm.
ISBN13978-0-470-87066-2
ISBN100-470-87066-4
1.Securitiesindustry. 2.Corporations—Finance—Management. I.
Dalgleish,Elaine. II.Title.
HG4521.S5732006
658.15(cid:2)224—dc22
2005027085
BritishLibraryCataloguinginPublicationData
AcataloguerecordforthisbookisavailablefromtheBritishLibrary
ISBN13978-0-470-87066-2(HB)
ISBN100-470-87066-4(HB)
Typesetin10/12ptTimesbyTechBooks,NewDelhi,India
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Contents
Introduction xvii
Acknowledgements xxi
AbouttheAuthors xxiii
PARTI INTRODUCTORYELEMENTS 1
1 BasicCorporateActionConcepts 3
1.1 Introduction 3
1.2 DefinitionofCorporateActions 3
1.3 PurposeofCorporateActions 3
1.4 ImpactofCorporateActions 5
1.4.1 ImpactfromthePositionHolder’sPerspective 5
1.4.2 ImpactonthePriceoftheUnderlyingSecurity 6
1.5 TheLifecycleofaCorporateAction 6
1.5.1 Mandatory(Generic)Lifecycle 7
1.5.2 MandatorywithOptionsLifecycle 7
1.5.3 VoluntaryLifecycle 7
1.5.4 Multi-StageLifecycle 7
1.5.5 IssuerNoticesLifecycle 7
1.6 Summary 8
2 EventDescriptionandClassification 9
2.1 Introduction 9
2.2 EventDescriptions 9
2.2.1 PaymentofInterestDue 10
2.2.2 PaymentofIncomeEarned 10
2.2.3 DistributionofCapitalReserves 11
2.2.4 EquityRestructure 12
2.2.5 DebtRestructureagainstEquity(IssuedCapital) 14
2.2.6 DebtRedemption 15
2.2.7 RaisingofCapital 15
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vi Contents
2.2.8 Re-organizationofCompanyStructure 17
2.2.9 IssuerNotices 19
2.3 EventClassification 19
2.3.1 Impact 20
2.3.2 Lifecycle 20
2.4 EventCombinations 20
2.5 EventVariationsandTerminology 22
2.6 Summary 22
3 TheSecurities(andCorporateActions)MarketPlace 23
3.1 Introduction 23
3.2 TheSecuritiesMarketPlace–Overview 23
3.2.1 TheTradingEnvironment 23
3.2.2 Issuers 25
3.2.3 Securities 25
3.2.4 Investors 27
3.2.5 AgentsforInvestors 28
3.2.6 SecuritiesTradingOrganizations(STOs) 28
3.2.7 CSDs,ICSDsandCustodians 30
3.3 Participants–TheCorporateActionsPerspective 31
3.3.1 Issuers 32
3.3.2 CSDsandICSDs 32
3.3.3 Custodians 33
3.3.4 PositionHolders 33
3.3.5 Individuals 34
3.3.6 InstitutionalInvestors 34
3.3.7 SecuritiesTradingOrganizations(STOs) 34
3.4 Summary 36
4 StaticData 37
4.1 Introduction 37
4.2 SecuritiesStaticData 37
4.2.1 CommonAttributesofSecuritiesStaticData 37
4.2.2 DetailedAttributesofSecuritiesStaticData 38
4.2.3 ChangeableDetailedAttributesofSecuritiesStaticData 40
4.2.4 AdditionalCorporateActionsSecuritiesStaticData 41
4.3 ParticipantStaticData 41
4.3.1 CommonAttributesofParticipantStaticData 42
4.3.2 DetailedAttributesofParticipantStaticData 43
4.3.3 ChangeableDetailedAttributesofParticipantStaticData 44
4.3.4 AdditionalCorporateActionsParticipantStaticData 45
4.4 SourcesandMaintenanceofStaticData 45
4.4.1 Securities 45
4.4.2 Participants 46
4.5 Summary 47
5 SecuritiesPositionManagement 49
5.1 Introduction 49
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Contents vii
5.2 TheSTO’SRisk 49
5.3 FundamentalsofSecuritiesPositionManagement 50
5.4 GenericSecuritiesAccountingPrinciples 52
5.5 ExtendedSecuritiesPositionManagement 53
5.6 DisparateTradeandPositionRecords 54
5.7 Reconciliation 54
5.8 Summary 55
PARTII MANDATORYEVENTS 57
6 OverviewoftheGenericCorporateActionLifecycle 59
6.1 Introduction 59
6.2 IssuerCommunicatesEventData 60
6.3 EventTermsCaptureandCleansing 60
6.4 DeterminingEntitlement 60
6.5 CommunicationofEventInformation 60
6.6 CalculationofResultantEntitlements 60
6.7 PassingofInternalEntries 61
6.8 CollectionandDisbursementofResultantEntitlements 61
6.9 UpdatingofInternalEntries 61
7 StraightThroughProcessing 63
7.1 Introduction 63
7.2 STPandCorporateActions 64
8 EventTermsCaptureandCleansing 67
8.1 Introduction 67
8.2 EventTerms 68
8.2.1 UnderlyingSecurity 68
8.2.2 EventDates 68
8.2.3 EntitlementSecurityand/orCurrency 69
8.2.4 RatiosandRates 69
8.2.5 TreatmentofFractions 70
8.2.6 ExchangeRates 71
8.2.7 OptionsAvailable 71
8.2.8 AdditionalEventConditionsandInformation 71
8.3 SourcesofEventTerms 72
8.4 AvailabilityofEventTerms 73
8.4.1 UponIssueoftheSecurity 73
8.4.2 DuringtheLifeoftheSecurity 73
8.5 CleansingofEventTerms 74
8.5.1 TheImportanceof‘Clean’EventTerms 74
8.5.2 Approachesto‘Clean’EventTerms 75
8.5.3 TimingofEventTermsCleansing 76
8.6 WhentoApplyEventTerms 76
8.7 ManagingChangestoEventTermsThroughouttheLifecycle 76
8.8 Summary 77