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Eagle, FTID, RDR Preach Reference Data Message

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Eagle Investment Systems last week embarked on a mini-tour of Europe, hosting a series of reference data breakfast seminars. While specializing in portfolio management and accounting systems, Eagle has taken a data-centric model and was preaching the reference data message as the cornerstone of any initiative to accurately value an institution’s portfolio.

Eagle’s chief operating officer, Lou Maiuri, was joined by FT Interactive Data’s business development manager, Haydn Webley, and Reference Data Review’s own editorial director, Angela Wilbraham, on the tour, which started in London and hit Zurich, Stockholm and Amsterdam. The London event was busy while the continental European events were more cosy and interactive – perhaps indicating the higher profile reference data has achieved in the U.K. compared with other European centres. Maiuri outlined case studies of implementing a reference data solution. The objectives achieved through these projects included reducing data related costs by 30% within three years. This was achieved primarily through the centralization of data management, which among other things eliminated multiple feeds going into different departments of the same organization. As Maiuri pointed out, many organizations realised that they already had the resource of a full data management team but had informally distributed the required tasks among a number of staff who had other, often more pressing priorities and often duplicated each other’s efforts. By formalising a resource dedicated to central data management, they could provide a more effective operational and strategic role. Part of Eagle’s product development included providing scalability for handling data usage patterns – specifically for managing data loads at one region’s end of day while other regions were still active and requesting data. Eagle provides automated business-rule support for data cleansing, and the improved data quality and timeliness provided in a standard format enables re-usability throughout the organization, Maiuri said. In some cases, organizations were then able to create revenue streams through managing data as an asset – charging back internally for the use of its data which turned the data management function into a profit centre with tangible value. One of the most common issues Eagle has come across, said Maiuri, is the ‘islands of technology’, where each department – trading, accounting, performance, analytical systems, custody, etc. – uses its own legacy technology and integration of the departmental data is handled to some extent by spreadsheets and reports. This, Eagle believes, should be addressed by providing an integrated and homogenous data repository to which each function would interface. Maiuri also pointed to ‘data religious wars’ – where one division believed, for example, Salomon prices were better, while another division preferred Goldman Sachs prices. As such, the so-called ‘Gold Copy’ had to be extended down to the division level. As the solution is intended for use by the business, Eagle opted to externalize rules so that the business user could implement changes through a graphical user interface on the fly without relying on programmers. Outlining the approach taken by the case study firm, Maiuri said a comprehensive business analysis exercise was undertaken, and project momentum and business buy-in built through a presentation showcase throughout the organization. Following the proof of concept with Eagle as the preferred vendor, they agreed on a data architecture that fit into the organization’s existing infrastructure and business process model and met their future requirements. They then worked towards an initial short-term goal to provide demonstrable results – typically within a four- to six-month timeframe, said Maiuri. As background, the Eagle Pace and Star portfolio management and accounting solutions, respectively, are founded on Eagle’s data management system, Eagle Reference Manager, which is essentially a hub for storing, scrubbing, validating and normalizing reference data for distribution from a central location. Wilbraham’s presentation focused on securities identifiers, drawing an analogy between the single currency the euro and how it has eased travel through many places in Europe (although it has eased little else…), and how a unique instrument identifier (UII) would similarly ease the transport of securities data throughout the trade life cycle. While in theory a UII is a logical way forward, and has gained support from industry associations such as the Reference Data Users Group and the Reference Data Coalition (Redac/ FISD), the reality is that there are still too many numbers in circulation. With around 65 national numbering agencies managing local codes such as Sedols, Cusips, and Valorens, and vendor proprietary codes such as RICs and Bloomberg Identifiers, as well as ISINs, the job of maintaining, cleans-ing and cross-referencing between these codes used at different operat-ional areas within a financial institu-tion is cumbersome and error prone. Wilbraham said, “Any delay in identifying a security correctly by its numbering code leads to a breakdown in straight through processing.” Among the potential solutions explored, the expansion of the ISIN to include the market level identifier and London Stock Exchange’s aggressive Sedol expansion plan were discussed. While ISIN’s parent, the Association of National Numbering Agencies (ANNA), is still considering their approach, it may find it difficult to get sign off from the 65 NNAs that make up its membership. The commercial backing of the LSE for its Sedol project appears to be receiving the most support from the industry associations at this time. The issue of charging for the securities identifier codes was, however, raised by some European users as a barrier to progress, as they believed it would be hard to secure buy-in for the LSE’s proposed fee structure. FT Interactive Data’s Webley outlined the case for addressing at reference data as a whole. He presented figures from TowerGroup – which many of our readers will be familiar with – including the estimate that an average of 16.4% of trades are rejected from automated processing routines, and 45% of trade failures are due to faulty reference data. He also quoted an SIA study showing that 42% of transactions are still paper-based, and some 40% of firms enter data twice for the same transactions. Webley mentioned that FT Interactive Data provided access to over 3.5 million securities covering pricing, dividends, security master, corporate actions and cross reference data. But he also acknowledged that no single vendor provided the full range and depth of data required. According to Webley, data delivery is only a partial solution, but understanding and interpreting the data is key to the data having real value and centralising and automating data management is a key step to addressing the current deficiencies. But the week wasn’t all serious – the team managed to sneak in some whirlwind city tours, good food and wine at the famously ornate Café Opera in Stockholm, some blackjack, and a night-time stroll along some of Amsterdam’s more entertaining streets. As if that wasn’t enough, Eagle’s regional sales director and the event organizer Paul Lumsden is taking the Eagle team on a repeat performance this week with a roadshow focused on its other speciality – performance attribution and risk. Perhaps this trip will prove more lucrative on the blackjack front.

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