Entering the counterparty data race, Reuters is developing a dedicated counterparty data service scheduled for launch in the first half of 2007. The vendor is working in partnership with an as yet unnamed third-party counterparty content specialist.
According to Kevin Bradshaw, head of enterprise information at Reuters, an audited set of counterparty information, which can be used by customers as they work to comply with know your customer (KYC) legislation, will be at the heart of the service.
“We will also provide a maintained parent to subsidiary hierarchy, and let our clients use that to comply with UCITS III,” he says. “Under UCITS III firms need to understand the relationship between instruments issued and traded and held, and take that back to legal entities. The metadata between the security ID and the entity ID will be part of the service.”
Reuters will have far from a clear run at the counterparty data space, in which there are already a number of competing propositions. As reported in Reference Data Review last month, Interactive Data Corp unit FT Interactive Data has partnered with both CounterpartyLink and Deutsche Boerse’s Avox for its service. First into the market were Standard & Poor’s, Telekurs and Dun & Bradstreet with their Crosswalk proposition.
An important differentiator of the Reuters counterparty data service will be that Reuters will ensure there is a linkage from the RIC to the issue to the issuer, Bradshaw says, enabling clients to start with the instrument traded and ultimately navigate back to the legal entity that issued it, and up through the parent and down through the subsidiaries. “There isn’t a comprehensive service on the market to do that, and offer up reference data on an entity that will satisfy KYC/anti-money laundering requirements,” he contends. “Some organizations will focus on the provision of the reference data, but not necessarily the metadata that will enable that navigation.”
Bradshaw believes the industry is now at the point with counterparty data that it was at with instrument data around five years ago, in that firms are starting to grapple with developing standards and an acceptable data model for counterparty data. “A huge focus in the industry today is trying to manage counterparty information and bring it up to the same standard as has been achieved on the instrument side,” he says. “There are two drivers for this – the management of risk and the need to adhere to regulation such as the Patriot Act, KYC and MiFID. There is a double-sided push.”
One challenge is the fact that the data management systems on the market are not as advanced in their counterparty data capabilities as they are in their instrument data capabilities, although that is changing, he says, and indeed the very best broker/dealers have created legal entity and client counterparty masters that feed applications across the organization. Another challenge is that there is no market accepted standard for counterparty identification: information on each counterparty is harder to come by as there is not the multitude of reliable, auditable sources that exist for instrument data.
As far as codes other than RICs are concerned, Reuters says the fact that it will be linking its counterparty data to its instruments data will enable users to leverage the symbology cross-referencing capabilities already available through its pricing and reference data service.