Standards and identifiers are helping to improve the quality of data used by capital market participants, but organisations with legacy architectures are finding it challenging to capitalise on those benefits, according to polls by A-Team Group.
Half of respondents to surveys held during a recent A-Team Group Data Management Insight webinar said that data standardisation had boosted the quality of the data entering their systems. A fifth also said data standards had strengthened their regulatory compliance processes and had aided system interoperability and the integration of data.
Nevertheless, a separate poll conducted during the “Streamlining trading and investment processes with data standards and identifiers” event found that a third of respondents said they had encountered difficulties in implementing data standards over legacy systems and a quarter declared their implementation efforts had been hobbled by fragmented tech stacks.
The results bore out a key message from the webinar, which brought together senior leaders from the data vendor and consumer spaces: without standards, firms face higher costs in a variety of data processes and risk losing competitive advantage by failing to leverage automation and analytics at scale.
The panellists – Adriana Ennab, Executive in Residence at Global Digital Finance; Linda Powell, Deputy Chief Data Officer at BNY; Laura Stanley, Director of Entity Data and Symbology at LSEG D&A; and, moderating, Stephan Dreyer, Managing Director at ANNA – highlighted how an absence of data standards can lead to fragmented data and a lack of common language, which bring inefficiencies, operational risk, reconciliation delays and regulatory misreporting.Volume Surge
The increasing volumes of data that financial institutions need to operate optimally is placing pressure on data managers to keep that information clean, ordered and accessible so that it can be put to the most effective use. Organisations are achieving this through a variety of standards that ensure data and its metadata adhere to a set of common characteristics. Identifiers aid in the process by creating unique tags that enable the tracking of data through systems, making it easier to link common data sets and enable interoperability.
One speaker opined that data standards are “fundamental and essential” and form the “common language” required for markets to operate, and it was also observed that standards provide the essential “plumbing” that enables efficiency, transparency, and trust.
Many benefits of working to a set of data standards exist, besides those identified in the polls, the webinar heard. Improved data quality and interoperability reduces operational “breakage”, which benefits customers. And it is also essential to the implementation of new data distribution and ledger modes, such as blockchain, as well as for the use of artificial intelligence (the webinar also heard that AI can help in implementing data standards with speed and efficiency).
Not Easy
But the polls highlighted, too, many challenges in achieving those advantages. Legacy systems are difficult to modify as they are built upon existing internal identifiers, for instance. Panellists suggested a strategy that adds external standard identifiers to internal master lists, enabling firms to leverage interoperability while maintaining operations on existing systems.
And the process of issuing identifiers also adds complexity due to necessary due diligence, such as KYC checks.
Ensuring adoption of standards is tricky even within organisations that have optimised technology setups. The webinar heard that regulatory push was sometimes critical, as evinced by the widespread adoption of the Legal Entity Identifier (LEI) system.
Good Identifiers
The panellists surfaced a number of key attributes of a good standard and identifier: they must be open source and a public good, unambiguous, persistent and publicly available. Associated reference data that provides context and richness is also critical and identifiers should also be machine-readable and interoperable by design.
Unifying the large number of standards that exist worldwide is ambitious, the panellists concluded, though progress is being made, as evinced by LEIs. Over the next five years, broader adoption of ISO standards is anticipated across new asset classes like tokenised and ESG-linked instruments, with hope for integration into smart contracts.
Rather than needing entirely new identifiers, the focus should be on harmonisation and mapping of existing codes and ensuring they remain future-relevant, the webinar heard.
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