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Confluence’s Botula and Powell Elaborate on Data Implications of Money Market Fund Reforms

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Data management solution vendor Confluence is busy readying itself to be able to provide its US-based customers with a solution that will allow them to meet the requirements of the US Securities and Exchange Commission’s (SEC) incoming Money Market Fund Reform Rule. Kirk Botula, executive vice president and chief operating officer, and Scott Powell, product manager at Confluence, explain to Reference Data Review that the Pittsburgh headquartered vendor hopes to have the finished XML tagging module ready by the third quarter of this year.

Confluence, which is focused on the automation of fund administrators’ data processes and has been around since 1991, is currently awaiting the final details from the SEC before it can complete the development of its new module on its Unity Regulatory Reporting solution. The vendor is hoping to add to its arsenal of downstream function support capabilities on the platform, which is aimed at managing the data supply chain. “Firms can gain greater control over data quality and scalability as a result of using the Unity Regulatory Reporting solution,” contends Powell. The platform supports downstream data processing such as that for regulatory reporting and marketing purposes.

To this end, the solution aims to simplify report generation and deliver complete reports to comply with the SEC’s new five day mandatory turnaround cycle. It is focused on supporting the preparation and filing processes for the SEC’s required Form N-MFP, via XML, and repurposing of the same content to create and deliver the necessary web reporting. The Money Market Fund Reform functionality will be added to the vendor’s data hub, which is aimed at managing the data supply chain, as a new module.

Botula reckons the solution is ideally suited to the requirements of the reform, as it is wholly focused on facilitating the repurposing of data for different end functions. “Around 90% of the data required by regulatory reports is from the same data set,” he explains. The vendor’s solution has therefore been designed to treat this information as an asset, he continues. The platform acts as a central hub for a fund administrator’s data and each product hangs off that hub, which acts as a data collection and cleansing engine.

Accordingly, Confluence has readied itself to be able to provide the requisite HTML web reports but is awaiting confirmation from the SEC around the data formats that will be required to be submitted to its Edgar filing system. The reform requires funds to submit new monthly reports , as well as their regular quarterly reports, in a much shorter timeframe and in a new electronic format. “The timeframes have changed from 60 days to just five for mutual funds in the US and these reports must be in an XML format rather than submitted as a print file,” elaborates Powell.

The premise of the new solution is that the data that currently sits within the hub can be repurposed by a new front end module that confirms and delivers the correct data to the regulator in the required format. The new regulatory reporting solution therefore leverages the source content method of XML tagging, which has become a real focus within the US regulatory community. Although the money market reforms are not using XBRL, which is also a form of XML tagging, they are based on the same concept of tagging documents and data at source.

The SEC seems keen to ensure XML tagging is considered at every possible opportunity; it has already examined XBRL’s potential in the corporate actions space and for source tagging of the underlying documents for structured products such as mortgage backed securities.

However, the reforms represent a big change for the market and one that must involve a significant investment in new technology. Confluence conducted a survey earlier this year aimed at discovering the perceived impact of the US money market reforms in particular and 72% of respondents indicated that they were concerned about meeting the reporting deadlines. “The economic factors of recent years have also made meeting data reporting requirements difficult because there is an increased need for transparency but fewer staff to deal with the data,” says Botula.

Powell reckons the championing of XML tagging by the regulatory community will be of benefit to those facing this cost/transparency dilemma. He reckons the increased scalability of automatically tagging data via a platform such as Unity Regulatory Reporting will allow funds to do more with fewer resources at hand. He hopes that all of the vendor’s current US-based clients will opt to use the solution.

According to Botula, Confluence currently has a client base of 40% international funds and 60% US funds, including mutual funds, hedge funds and funds of funds. In terms of direct competition, he indicates that although many of the downstream focused reporting solutions it offers compete with other vendor offerings in their respective spaces such as financial reporting or performance reporting, the overall data hub approach to this market is not common.

He also differentiates Confluence’s solution set from that of the data management solution vendor community. “Data management systems tend to be feeders of data for the security master file process, whereas we live further downstream of these tools. We offer more of a tools-based solution set rather than a generic data warehouse,” he explains.

However, this focus on the outputs of the data management process are on the radars of the firms that Botula labels as data warehouse providers. Asset Control, for one, has recently launched new solutions aimed at tackling the data challenges within downstream processes, including its recent AC Control module and compliance focused AC Invest.

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