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A-Team Analysis: Will the Securities Data Model Fly?

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At the Sibos Standards Forum in Sydney earlier this month, securities data came under the spotlight during a panel session designed to fill delegates in on the progress of ISO TC68/SC4/WG11, the ISO working group charged with the development of ISO 19312.

For the uninitiated, ISO 19312 is the planned standard for financial instrument data. WG11’s mission is to produce a data model and an ISO technical specification that provides a single standard for describing a financial instrument throughout its lifecycle, comprised of completely defined data elements and the relationships between these data elements. ISO 19312 is one leg of the three-legged stool of standards it is hoped will usher in the nirvana of true STP (the two other legs are ISO 15022/20022 for message formats and content and ISO 16372 for business entity identification).

Delegates turned up for the session in decent numbers, and the debate was lively enough. But observers were left wondering about the value of this initiative. Is it just an intellectual exercise, or will the development and adoption of ISO 19312 enable real efficiency gains to be made? Currently, across the industry, a huge amount of transformation happens each time content leaves one repository and enters another. With the new standard in place, the theory is that risk and cost should decrease as a result of the reduced need for interpretation.

James Hartley, chief technologist, Financial Information Services Division (FISD), Software and Information Industry Association (SIIA) and one of the panellists in the session, is confident the model offers value. “There is a need for a common language for describing securities and processing corporate actions, and that’s what this model is all about,” he says. “It is something the industry has never had – we’ve always just made do – but this is the 21st Century and there ought to be a better way to do this.” Of course, the FISD has long been a proponent of standards and particularly a securities data model, which forms a major part of the industry group’s focus.

But surely some stronger imperative will be required to make ISO 19312 fly? Nat Sey, reference data business manager, Interactive Data (Europe), also a panellist, says: “This needs to be more than just an interesting academic exercise in modelling a complex area of business. The question should not simply be, is this a good idea and should we proceed? But rather, if we proceed down this path and implement this data model, will the industry support the creation of messages and will it implement them any time soon? It’s all about ROI.” ROI has proved difficult to measure in the data business, holding back many internal initiatives despite regulatory pressure and the promise of operational efficiencies.

In these MiFID obsessed times, the industry is not short of drivers for change. “The question is whether this process can happen quickly enough and whether the industry will be prepared to wait,” Sey adds. “For example, the final technical specification is currently expected to be available Q4 2007, but MiFID (the various implementations of which could have benefited from the existence of such a model) will need to be implemented by November 2007.”

As reported in Reference Data Review, August 2006, the Reference Data Subject Group of the MiFID Joint Working Group, while striving to keep its work in line with that of WG11, is concentrating its standardisation efforts squarely on MiFID, in the belief that the imminent deadline will serve to concentrate minds on actual adoption. Says Hartley: “Realistically, the implementation deadline for MiFID is a maximum of six months from now. If a standard that is required for MiFID implementation is not there now, it won’t be there in time for the MiFID deadline. I’m a little concerned that Europe is scrambling to put things in place for MiFID without taking a longer term view.”

He is confident a driver for 19312 will appear. “Though the new data model will not be in place in time to support MiFID implementations, there will be something that comes around to justify it eventually. Europe especially is enough in love with ISO standards that it will not be difficult to make a business justification for adoption of the model. It just won’t be a justification for adoption overnight.” The initiative should be seen as a long-term strategic activity rather than a short-term tactical exercise, he says.

To be clear, it is not intended that the WG11 initiative create messages. Rather, it will create a data model which can be deposited into the ISO 20022 repository. Messages using the model will then need to be created as and when required by the industry. This in itself is a cause of some concern, because there is a perceived disconnect between work done to develop the model and benefit derived from usable messages. There is also the question of whether, and when, industry participants and data management vendors will be prepared to replace their existing data models with the new model. And the long-standing confusion around where and when ISO 20022 messages will replace ISO 15022 messages comes into play here too.

One point on which observers agree is that ISO 19312 needs more exposure. Following a December 2003 call for experts, representatives of around 10 countries are presently participating, and several industry liaison groups including FISD are involved. “I think the constituents involved in this so far have represented their expertise appropriately,” says Hartley, “but they are by no means as encompassing as is required if this is to become an industry standard. Exposing the model to more and more industry players and obtaining their review and comment is the only way something of this magnitude can be accepted and adopted by the industry as a whole.”
If you want to air your views on ISO 19312, the way to get involved in the creation and review of the model is via national standards bodies such as the Technical Standards Committee and the British Standards Institute in the UK.

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