The Depository Trust & Clearing Corporation’s (DTCC) acquisition of Avox has given the UK-based counterparty and entity data vendor the ownership structure it has long needed to establish itself as an industry utility, according to CEO Ken Price. As noted by Reference Data Review, the appeal for DTCC was in adding the final piece of the reference data puzzle to its overall offering in a bid to develop what Pat Kirby, managing director of Asset Services, calls “a unique opportunity in the utility space”.
Price, who has been at the helm of Avox for eight years, explains that the vendor has been contemplating how to modify its governance structure in order to be able to set itself up as a utility for some time. The vendor has undergone a number of restructures in order to modify its governance structure over the last few years: Deutsche Börse acquired 51% of the shareholding back in 2005, for example. Now, however, the exchange provider has sold its shares to DTCC and Avox is hopeful that as a wholly owned subsidiary of the DTCC, it will be able to benefit from its global presence and perceived market neutrality.
“The important parameters to consider for us were DTCC’s huge reference data capabilities and its global presence with operations in key financial centres New York, London and Shanghai,” says Price. “We can now use these on the ground operations to extend our market reach into new markets.”
Kirby adds: “The Avox acquisition has allowed us to fill the gaping hole of entity data that has been missing from our overall reference data offering. We considered Avox to be the gold standard in the market for this data and it was a natural fit for us in terms of products and services.”
He notes that DTCC is often perceived as the US equity clearing house and depository and nothing else, but it does a lot more than that: “We do corporate actions data cleansing, provide issuance data and derivatives data, just to name a few.” The perception of the vendor as a primarily US focused entity is also false, says Kirby: “We have a global presence and a global focus.”
However, given the soon to be passed Office of Financial Research reforms in the US, the DTCC’s potential reference data utility pitch is rather well timed for the US market in particular, especially given its standing as the US depository. Caroline O’Shaughnessy, vice president and global head of sales in London for the DTCC, explains that the by-product of acting as a depository in the US market is also direct access to a significant volume of reference data. “We already have a utility mentality,” she adds.
Although DTCC is keen to get in on the utility action, the acquisition was actually prompted by requests from its clients, says O’Shaughnessy. “We surveyed around 25 of our financial institution clients to ask what they thought the biggest challenge was for them in the market and 90% said it was legal entity data,” she explains.
Three months of due diligence work later, and Avox is now part of the overall DTCC portfolio. However, the DTCC is not stopping there, says O’Shaughnessy: “We need to continue to build more relevant solutions for the market via new partnerships in the vendor community. The data industry is unique in that you are often required to partner with your clients and your competitors.”
Price adds: “It is the nature of the industry that your partners may be competitors but this is due to the sometimes overlapping but often complementary nature of the solutions on offer.”
So, more partnerships are on the cards for the future, but for now, the utility space seems to be the one to watch. Other vendors already offer reference data utility solutions, albeit with slightly different pitches and functions on offer. SmartStream’s DClear platform, first announced back in 2008), offers a reference data mapping service and SIX Telekurs has Connexor, which currently only operates in the Swiss market. It will be interesting to see how the DTCC offering will stack up against these, once the dots have been joined between its individual offerings and Avox has been integrated into the overall portfolio.