By Rick Enfield, product business owner at Asset Control

The rise of alternative investment classes and derivative products corresponds with an increase in the number of counterparties financial institutions are dealing with today. While financial institutions have kept a close watch on systemic and operational risk factors, additional levels of investment complexity, coupled with a shaky economic environment, have put a new emphasis on the “other” KYC - know your counterparty – and the potential for exposure to counterparty risk. To properly assess any potential counterparty risk, financial institutions are reliant on clean counterparty data, centrally and properly managed.

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Market leading corporations are embracing master data management (MDM) to help make use of their information assets and strengthen their competitive position. Others are either in early stage planning or at risk of lagging behind those who already dominate their markets. Although still an emerging technology, MDM is quickly becoming a mainstream tool in light of a stagnant economy, globalisation and the complexities of government regulations. By now, both IT and business managers are all too familiar with the high costs and expenses incurred by bad data.

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A-Team Group and EDM specialist Goldensource are joining forces to debate the issues surrounding the derivatives data deluge next week at 11am EST on May 20th in a free live webcast, Derivatives: The Eye of the Data Storm.

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Disparate markets and complex trading call for smarter exceptions management, argues Donal O’Brien, business development director of Coexis.

If Societe Generale’s reference data systems had been a bit wiser to the activities of its users, could the actions of Jerome Kerviel and the French bank’s subsequent £3.7bn loss have been avoided? The need for increasingly complex interactions between central reference data and distributed transaction processing systems is driving many banks and brokers to re-evaluate their processes. But it’s only through the application of intelligent exception management, sometimes known as straight through exception processing (STEP), that they can really grasp the nettle.

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Selling a mutual fund requires complex mutual fund information to be summarised down into data that sellers can understand, which is most often driven by a technology or data warehouse infrastructure. Missing and/or bad mutual fund data is nothing new, but it has recently garnered the attention of regulators as it was directly responsible for creating the renowned mutual fund “breakpoint” issue. As a result, sellers of mutual funds are now asking what they can do to better understand the fundamentals of mutual fund data and how to identify possible risks if these issues were to occur again.

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Corporate actions processing is moving to centre stage in the minds of back office managers, in the same way that trading has been to the front office for a very long time. Corporate actions processing is expensive in terms of human resources. There are persistent rumours that missed corporate actions have cost some banks dearly in compensation (although this is seldom confirmed by banks), making them expensive in monetary terms as well.

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As the Single Euro Payments Area (SEPA) deadline looms, there is a sense of panic growing among organisations, many of which are not prepared for the significant changes that will be required for payment processes.

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A unique, international business entity identifier (IBEI). What’s so hard about that? We send shuttles into space, perform heart transplants and generate nuclear power. Why do we have such a hard time agreeing on the identity of a mining company in Johannesburg, a drug company headquartered in Basel or a hedge fund in the Cayman Islands?

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As markets coalesce across systems and nations, the financial industry is faced with a new challenge.
Thanks to new information technology, products and services are more integrated than ever. EU legislation, such as Basel II, the Transparency Directive and MiFID, is on the increase. It is now incumbent upon the financial industry to come to terms with technological and structural change, and to consistently guarantee legally stipulated transparency. The usual methods of implementation will, however, not suffice.

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Change is like the common cold – there is a lot of it about.

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It seems like only yesterday we were talking simply about reference data with lots of debate over definitions, an underlying focus on operational efficiency and a business case cut straight from the technology ROI rulebook. My, my how quickly things have changed. Reference data has evolved into EDM. Risk mitigation has replaced operational efficiency. And most of the financial institutions we’re dealing with are more concerned with measuring the quality of the data than they are in crafting a cost justification business case.  

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A recent industry periodical spoke of data as “ubiquitous”… touching all corners of an enterprise and becoming the lifeblood of an organization.” Having spent my 25-year career at various securities data vendors, there’s nothing new here.

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Markets in Financial Instruments Directive (MiFID) has been described as pure cost pain for little liquidity gain by some. What might the impacts be for the financial services firms in terms of conduct of business, data management and best execution and order-handling processes? asks Dr Anthony W Kirby, Fellow of European Think Tank Promethee and Founder RDUG.
The Markets in Financial Instruments Directive (MiFID), which is due to be implemented across the European Union by April 2007, will apply to all financial instruments and investment advice exchanged across every EU-member state. MiFID replaces the Investment Services Directive (ISD), which was originally adopted in 1993, but in contrast to ISD, is a highly prescriptive directive, which leaves little room for interpretation.

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The planned International Business Entity Identifier (IBEI) – a unique identification system for investing and trading parties in the securities market – has been a long-standing objective since Swift allowed non-banking entities onto their network and the London Stock Exchange (LSE) lost control of central market trading.

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The problem with data in the securities industry today is there is too much of it coming from too many different sources and in too many different forms. The cost therefore of gaining the data you want and need, has never been greater and this is in the 21st Century with the world of the web with open access and virtually free information. One problem area is reporting of company financial data in a standard format. How is this data mess and associated cost possible today and what could be a solution to provide assured information at the right price, at the time the industry needs it?

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In case you are not aware, the EU’s Markets in Financial Instruments Directive, or MiFID, has been under discussion and review for a number of years.

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The European Union’s pending MiFID initiative, or the Markets in Financial Instruments Directive, replaces the Investment Services Directive (ISD), which was originally adopted in 1993. The ISD defined “home” and “host” state regulators, establishing the conditions under which authorized investment firms and banks could provide specified services in other EU member states on the basis of their home country authorization.

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For those not quite up to speed, EUSD stands for the European Union Savings Directive and it impacts just about all financial services firms who act as collecting or paying agents in capital markets within the European Union. These paying agents – including banks, building societies, corporations issuing bonds that pay interest on certain instruments – will be required to deliver information on the interest payments made for each customer to the authorities of the EU member states where the investor resides (such as the Inland Revenue in the U.K.).

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Many organizations have attempted to create centralized data groups (CDGs) responsible for sourcing, maintaining and distributing core data to all departments. There are clear reasons for doing this: efficiency, consistency, data quality, risk and regulatory compliance.

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Corporate Actions has rightfully been in the limelight of late. The RDUG Corporate Actions Working Group has just released an Interim White Paper with the assistance of both practitioners and suppliers which examines the benefits of automation and presents a breakthrough in mapping electronic document templates upstream to ISO 15022 messaging downstream, comments Dr Anthony W Kirby, Founder of RDUG & Member of the BSI Technical Standards Committee

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