The Ripple Effect

The news last week that entity and counterparty data specialist provider Avox had been snapped up by a willing party in the form of the Depository Trust & Clearing Corporation (DTCC) comes as no surprise on either front. But what does the sale mean for the other main entity data focused vendor on the scene, CounterpartyLink? Moreover, if DTCC is going down the data utility route with entity data (among other things), what of Swift’s plan to adapt the Bank Identifier Code (BIC) into a legal entity identifier?

Given Avox’s success in partnering with many of the big kids on the data block, such as Markit and S&P owned Cusip Global Services (CGS), and its netting of large customers such as Citi and Barclays, it was bound to catch the eye of those looking to get in on the entity data action. After all, the industry has long bemoaned the lack of a definitive entity data standard and the issue is at the top of the regulatory priority list. Every regulator and its dog are talking about systemic risk monitoring and the better tracking of counterparty exposure in the post-crisis world.

Furthermore, DTCC has made no secret of its desire to get in on the data utility action, with the establishment of a separate subsidiary to run its trade data repository earlier this year being one such example. If it has access to instrument data and entity identifiers, what is to stop it offering its services to the US government as a ready made data collection agency for the Office of Financial Research?

But what impact would such a move have on the work going on within Swift towards reworking the BIC into a suitable format for legal entity identification? Granted, it is fairly early days for the Avox and CGS join venture around Cusip Avox Business Reference Entity identifier (Cabre) codes, but if the US is pulled in that direction, then surely Europe must follow? Global harmonisation has been promised countless times over the last couple of years, after all.

I imagine that given their collaboration going on around corporate actions and XBRL standards, DTCC and Swift will also be having serious conversations about entity data in the near future. Swift isn’t likely to give up its work on entity identification without good reason.

I’ll certainly be keen to talk about the subject during my panel session on golden copy and data utilities at Sibos this year. Thankfully the session has a much better timeslot (4pm on the first day of the conference) and is in a bigger room – indicative of how seriously Swift and the industry are taking the issue of reference data.

But, as well as the wider standards-based impact of the news, there is also an impact on the rather smaller world of entity data vendors. What of Avox’s main competitor in space, CounterpartyLink?

It has been a fairly quiet start to 2010 for the vendor in terms of announcements, but at the end of last year, it was also busy with partnerships and development work. In December, the vendor announced it would be teaming up with SmartCo to integrate the EDM vendor’s DataHub solution with CounterpartyLink’s issuer, client and counterparty data. Given its past successes and the fact that any utility pitch is likely to take time to develop, CounterpartyLink may not suffer too much in the short term from a regulatory driven advantage on the part of its competitor. Moreover, Avox will take time to be integrated into DTCC’s overall offering.

However, Avox will benefit from the larger player’s backing and its extended resources and reach. It will be interesting to see how CounterpartyLink responds to the challenge and whether there is a monopoly on the cards in the long term.

The Avox acquisition is also likely to have caught the eye of DTCC’s long term competitor in the corporate actions data cleansing space: Fidelity ActionsXchange, which has also recently made overtones about getting into the entity data space.