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Regulatory Compulsion is on the Cards and ECB is Looking at Data Semantics Repository, Says Atkin at TSAM 2009

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The Enterprise Data Management (EDM) Council has been involved in a “whirlwind” of meetings with regulators over recent months to further the cause of data management, said EDM Council managing director, Mike Atkin, at TSAM 2009 this week. The European Central Bank (ECB) in particular is looking at the area of data semantics adoption in the industry and how it could get involved in providing a repository for data identifiers for the market, said Atkin.

The ECB will be meeting with the EDM Council, the US Federal Reserve and five departments of the Securities and Exchange Commission (SEC) over the next few months to discuss the area of reference data, Atkin told delegates. “The ECB is looking at providing standardised identifiers for data in a centralised repository that would be freely available to the industry,” he explained. “This would not put it into competition with the vendor community but it would likely push them into provided value added services rather than what should be freely available to all.”

Atkin estimated that the discussions concerning how to get from concept to proven capability would likely take a year, followed by three years or more of implementation to produce such a repository. “The foundations of the project would be based on ISO 20022 standards and the project is likely to increase transparency around data as it continues,” he explained.

The basic building blocks for EDM are the precise identifiers for entities, instruments and attributes with regards to data, according to Atkin, and this project would be one step towards achieving this “baseline”.

Regulation is also on its way, said Atkin, and this should provide compulsion for firms to tackle their data management challenges. “The regulatory community has been very receptive in general to listening to the EDM Council’s agenda. We have common goals of preventing a reoccurrence of the current crisis through the introduction of better data quality and data management.”

Atkin highlighted the impending introduction of principles-based regulation rather than prescriptive and the trend towards pan-global coordination of regulators. “All recent regulatory reports have focused on a coordinated regulatory approach and scrutiny of operational and systemic risks,” he explained. “STP is now back in vogue because it’s a method of increasing transparency across global markets.”

The focus of regulatory scrutiny with regards to data will fall in four areas, according to Atkin. “The need for unique identifiers of business entities tops the list, then data attribute identifiers, instrument data and symbology is next and the classification of instruments, sectors and business functions,” he said. “We have had KYC, now it’s time for KYP: know your product.”

The later panel discussion on volatility and change also discussed the need for regulatory compulsion. André Kelekis, head of global market data strategy at BNP Paribas, agreed with Atkin’s point that some form of compulsion is needed to force change for the better within data management. “Only a new regulatory framework will drive forward the adoption of data standards, as the industry initiatives have failed thus far,” said Kelekis.

Iman Szeto, director of the global reference data programme at UBS Global Asset Management, seconded this notion: “There needs to be a big stick to force change. Regulators must improve their scrutiny of reference data and audit data infrastructures to push this forward and given the current market, this is likely,” he said.

Liam Davis, vice president of global data management strategy at Northern Trust, thought the ECB’s plans to introduce a standardised pool of reference data terms was a step in the right direction. He hoped the central bank would even go one step further and create a fully functional reference data utility. “Vendors corrupt data and we need to take them out of the equation by the introduction of a common pool for pricing and reference data across the industry,” he said.

Szeto added that there should also be more training available for reference data professionals and a certification process to ensure a minimum level of understanding.

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