Data Management Challenges Ensue08.30.2011
Regulatory change ups the demand for real-time reference data.
The advent of company ID tags heralds a wave of data management challenges for financial firms, which in turn is upping the demand for enterprise data management (EDM) technology.
FinReg established the Office of Financial Research (OFR), a division of the U.S. Treasury that’s charged with collecting data to support the Financial Stability Oversight Council.
The OFR is standardizing the manner in which parties to financial contracts are identified in the data it collects on behalf of the FSOC, including the Legal Entity Identifier (LEI) and institutional arrangements for issuing and maintaining identifiers and associated reference data.
“Regulatory focus on data, with initiatives such as the Office of Financial Research (OFR) in the U.S., will make more financial institutions to look at data as an important resource to be managed and analyzed as a part of institutional governance, and not just as an adhoc consequence of implementing one system or another,” Brian Sentance, CEO of Xenomorph, told Markets Media.
OTC reforms will dramatically hike operational costs for market participants, leading them to streamline their derivatives operations.
The implementation costs of compliance are likely to be significant, as are many of the ongoing costs of the new processes imposed by the regulatory rulings, such as clearing and trade reporting.
Dodd Frank in the U.S. and EMIR in Europe will dictate a new regulatory landscape for derivatives, forcing trading venues to comply with new rules and regulations for pre-trade, trade and post-trade requirements. This will include the central clearing of a number of in-scope OTC derivatives instruments.
In this environment, firms will need to manage in real time connections to multiple trading venues, clearinghouses and trade repositories, for all asset classes.
Counterparty exposure needs to be properly aggregated across multiple legal entities and the current absence of a single source to provide cross-referenced data makes this a complex procedure. Further reporting requirements from the OFR are anticipated as upcoming regulations are finalized, which will drive further demand in this area.
By combining securities, customer/counterparty and position/transaction data into a single linked data store, enterprise data management helps organizations determine enterprise risk.
With the advent of real-time oversight and surveillance, real-time security master copies become even more important. Firms need the ability to on a real time basis accept requests for security master information from trading, immediately retrieve that data from data vendors and make it available for enterprise usage all on an interactive basis.
Without this real time security master component the consistency and completeness of the data reported real time cannot be ensured.