24 April 2014

Gerard Bermingham

Gerard Bermingham - Information Mosaic

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XBRL Discussion Group

As XBRL becomes more recognised as a vitally important tool to reduce data costs and streamline communication in the financial services industry, the full opportunities need to be explored. To ensure a full and clear understanding by the financial services industry globally rather than just those countries where is has already been adopted, especially in light of the DTCC and SWIFT initiative.

Lost in translation?

29 March 2010  |  4779 views  |  4

Like the terms ‘Golden Record' and ‘Golden Copy' before it, we are no doubt hearing the use of the term XBRL as the ‘new' thing to standardizing data and reducing corporate action announcement risk.

 However, currently, public company press releases and prospectuses do not follow a standard in how corporate action events are defined. 

 Let's take an example of a simple Stock Split by Japanese company Mizuho, originally announced in May 2008. The headline on Reuters was "Japan's Mizuho plans 10-for-1 stock split"; sounds simple enough.  Reading further into the article it states "the bank will issue 999 new shares for every one" and raise the minimum trading unit from one share to 100.  So now is it a 999-for-1 stock split?

 Let's also include the interpretation of the announcements from a UK-based custodian and a US-based data vendor. The UK custodian decided it was a ‘Bonus Issue' and shareholders will receive 999 additional shares for every one share held.  The US data vendor announced it as a ‘Stock Split' and shareholders will receive 1000 new shares for every one old share held.

 Both companies' announcements resulted in the same number of new shares, but they were announced differently because of different local market practices. Had both sources announced to a US Asset Manager who then misinterpreted the data this would impact NAV calculations and lead to further errors.

 The point of this is to illustrate that there are still local market practices that also lead to incorrect interpretations, irrespective of the details announced by the issuer. The use of standard event types from the issuers, based on their local market guidelines, will go a long way to resolving these types of problems and again reduce the need for interpretation and the associated risks. Hence this issue must also be addressed to ensure the success of the XBRL announcement initiative. 

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Comments: (5)

A Finextra member | 30 March, 2010, 14:45

Yes Gerrard your spot on. I prefer to take one step at a time to solve this age old problem. First standardise issuer data. I think XBRL is well suited for this as it provides so much flexibilty through its XML centre. Once there is an electronic standard that can be verified at source and has security built arround it. See Codel as a potential solution in this area. The market/ industry can go straight to source to get totally accurate data. After this as you point out its market practice. Here i am expecting the DTCC through its own XBRL project to swing the USA and i beleive other major markets will copy into their own markets. The small local markets could be brought into line by themselves or either by Global Custodians stepping into the Issuer space by offerinf it as a service, a network provider or some other commercial offering?

I do start to see a glimmer of hope with XBRL but have to accept its a long road we look down

 

Gary 

David Baxter - Neurosoft Securities Limited - London | 31 March, 2010, 10:34

Gents,

Throw me a ‘best guess’ time line on adoption of XBRL by issuers globally.

I’m assuming there’s now a compelling (perhaps regulatory) reason for the issuers to get on board with this? Or has the market opened up about the amount of financial losses being incurred (because of translation errors) and the issuers are just being nice.

D

A Finextra member | 31 March, 2010, 12:50

Not sure Issuers are being nice but there is US Government interest in making it legal for Issuers to go electronic standard. Time line for the US for the legal route is tough to call but i have heard 2012 as a good date. I think this is simply to allow time to get through the legal hoops. I hope this can be alot faster if the industry supports it and gives the Government a mandate to force through.

I think the Global markets will follow very quickly the US model and it become much faster.

I hope the industry will come together on this creating a ground swell. Supporting the DTCC would be a good start

 

Gary 

Gerard Bermingham - Information Mosaic - New York | 31 March, 2010, 20:15

Gentlemen,

Thanks for your comments.  Unfortunately, I think the benefits to the Issuers of XBRL are still being defined and it will most likely take a regulatory requirement to get this enforced.  It would be good for us all to put our thinking caps on about this one and come up with some of those benefits.  As you say Gary, the US is taking the lead on this and I do believe other market will follow.  The ultimate benefit to all of us is a streamlined and more efficient shareholder service.  Do Issuers care about the services they provide to their shareholders?  Let's hope so!  Any other thoughts and ideas to support this initiative and build the momentum will I’m sure, be appreciated by the DTCC, SWIFT and XBRL US.

With regard to the timelines, I too have heard the date 2012 floating around.  I think this may be ambitious, but I also think our industry needs a tight deadline to move the process along.  If it’s 5 or 6 years away, or there’s no date, the topic gets raised, thought about, discussed, forgotten and raised again without any real movement.

 

A Finextra member | 31 March, 2010, 21:26

Yes Gerard, the benefits to the Issuer has to be defined or we will have to rely on laws

In my view Isssuer benefits can be lower cost as they could take charge of Issueing data from their agents. A XBRL Template could be populated by clerks and verified by the Company Secretary befor issue. It must be in the Issuer interest to ensure markets get good accurate and timely data to protect the share price. Not least their shareholders. It could come under Corporate Govenance possibly SOX?

 

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Gerard Bermingham

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Vice President Product Consulting

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Information Mosaic

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