Avox and Cusip Global Services (CGS), which is managed by Standard & Poor’s on behalf of the American Bankers Association, have joined forces to create a universal identification system for global business entities. Ken Price, CEO of Avox, and Scott Preiss, vice president in the Securities Classifications group at S&P, explain the details of the venture, which has been dubbed Cusip Avox Business Reference Entity identifier (CABRE).
According to the vendors, the new standard 10 character code will be generated and maintained for issuers, obligors and counterparties on a global basis. It will be made available to all existing Avox and S&P customers as an adjunct to existing services in the second quarter of this year. Customers that opt for the service have a variety of distribution options to choose from, say the vendors, including portfolio, bulk file and web-based applications.
Price elaborates on why his firm chose to partner with CGS and vice versa: “From the Avox perspective, we were attracted to S&P’s expertise in the identification arena and their proven distribution capabilities. While I cannot speak on behalf of S&P, I believe our reputation for high quality, low latency entity data and our highly satisfied customer base helped in their selection process. In terms of timing, the market has been asking for a global entity identification standard for years. Both of our firms felt it was time to take action and deliver.”
Preiss adds: “Avox is an extremely complimentary partner for CGS in this endeavour, given their particular strength in entity content outside the Americas, and our shared views on data integrity and primary sourcing. Our collective clients have been expressing increased frustration with the lack of a common language for entity identification, so the real question is, can we afford to wait?”
The current focus on counterparty risk in the market as a result of the financial downturn and events such as the fall of Lehman has underlined the need for common standards in the entity identification space. Up until this point, vendors have tended to focus on maintaining their own proprietary identifiers and avoided a truly joined up approach to the space.
However, this partnership may hopefully represent a new trend in the entity identification space towards cooperation or collaboration. Given that other corners of the data management market have gone down this partnership route to survive the hard times in the market, it bodes well for the future of common business entity identification (BEI) standards.
Preiss explains that this partnership in particular has been on the cards for some time: “Discussions with Avox have been in progress for more than 18 months; other potential partners were certainly considered, but none were as complimentary in this space.”
Avox has certainly been keen to work with as many different players in the market as possible (see its recent tie ups with Markit Document Exchange and Asset Control for proof). For BEI in particular, the vendor already has a number of additional non-exclusive partnerships with firms that provide entity identification, including Swift, Interactive Data Corporation and Markit.
“The objective really is to get the industry working off of a consistent set of underlying business entity data. The successful identification standard will be that which the market chooses because it best meets the requirements of universality, reliability and cost effectiveness. The CABRE is well positioned to address those requirements,” claims Price.
Preiss adds that both vendors are extremely supportive of global standardisation efforts, but they believe that to date, no other finished products meet the real-time needs of market participants. “One important distinction between this offering and other BEI attempts: we have not simply watched the market and ‘jumped in’ where we think there is a passing opportunity. Both CGS and Avox have a rich history of focus in the unique identification of business entities and enriched, associated content. It is core to what we do, and to the value we provide our customers – before, during and after the current credit crisis. We expect to continue to receive significant interest from our customers and the broader market in 2009 and beyond,” he contends.
However, Price clarifies that a standard is only beneficial if it is broadly adopted so that, in the case of an entity identifier, it can be relied upon for seamless communication and integration. He hopes that the combination of the Avox collaborative operational model with S&P’s high quality standards and large user base will make it possible to achieve this universality. “Additional vendors are encouraged to participate in order to achieve this end,” he continues. “Moreover, existing clients of Avox and S&P will be able to easily and quickly receive CABREs mapped to all entities that our firms currently maintain for them.”
The development road has not been without its hurdles, both vendors confirm. “They key issue was conceptualising the offering in a way that leveraged Avox’s service-based approach to data management and S&P’s robust identification and distribution capabilities,” explains Price. “We held a number of technical and business level workshops to fine tune this, but in the end both sides worked well together and converged on what we believe is an optimal solution.”
Preiss adds: “Of course any endeavour of this scope entails challenges, including the necessary investment to provide superior global coverage, timeliness, quality and support. The fact that CGS and Avox are experienced entity data experts in their respective regions has helped us overcome many hurdles that typically stagnate development at start-ups and other organisations. We have attempted to blend the tried and tested capabilities of both firms for the collective benefit of our customers.”
The vendors therefore hope to be the driving force towards convergence on a common data standard in this space of the market via this crowd sourcing approach, where a community of user firms provide intelligence about changes to business entities taking place every day in the market.
The partnership has already received approval from the EDM Council. Michael Atkin, managing director of the industry group, says: “This collaboration by two leading financial information companies is an important step in getting a global standard entity identifier in place across the industry. It should help their respective clients solve immediate business entity identification challenges and pave the way for easier integration as the drive for an industry standard identifier matures.”
The vendor led endeavour may indeed succeed where the politicians have thus far failed with regards to introducing an international business entity identifier (IBEI). Price, for one, is hopeful but cautious about the future: “We believe that this is the first truly global entity identification initiative that embraces user collaboration to help ensure timeliness and quality. The feedback so far has been very positive. However given the volatility of the economy these days I will reserve judgment as to how quickly firms convert this interest into usage.”