Thursday, August 14, 2014

Corporate Actions Using XBRL

Corporate actions, such as dividend declarations, stock splits, mergers and other activities that specifically directly affect shareholders are closely watched and used by some key market participants. Traditionally they have ben made available to stock transaction processors and investors through the old manual routine - press releases and regulatory filings - that are not machine readable. Consequently they need to be re-input into transactional systems, which is time consuming and expensive.

The market moves very quickly now and there is a continuing demand for it to move even faster. The problem is that regulators and others need to try and maintain a level playing field for all investors. With the speed of electronic news, even a few seconds advance notice of a significant event can be enough to create an advantage for some traders. So the need for a technology solution to eliminate these unfair advantages is growing more crucial.

Enter XBRL. It enables seamless and automatic transmission of data in a form that can be automatically acted upon without the need for human intervention. Therefore, corporate actions can be transmitted instantaneously.

In the past few years, XBRL US, DTCC and SWIFT all worked together to create a taxonomy and a business plan for using XBRL for corporate actions. Now XBRL International has assumed a responsibility for this and has formed an international committee to spark involvement from around the world. Of course, in most countries, XBRL is used for financial statements. However, corporate actions is different, focusing on specific events and much simpler transmissions. So it can be implemented very easily and yet delivers a very effective response to the time issue.

Hopefully the new group will inspire widespread usage of XBRL for corporate actions around the world and thus greater equity for investors.

Details on the The XBRL International initiative can be found through this link.


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