The launch a few weeks ago of a new company and eponymous data product, CounterpartyLink, signifies the growing demand for counterparty and legal entity data, fuelled by increasingly stringent regulatory requirements.
To date, the main source of legal entity data has been Dun & Bradstreet’s Duns numbers, and more recently the joint Crosswalk initiative it has with Telekurs Financial and Standard & Poor’s. The new entrant to the market raises the bar with both the timeliness and the focus of the data service.
The service will be one of the only sources commercially available to provide daily change updates in its premium product (D&B’s service provides monthly updates). The service is targeted at risk management, compliance, securities processing and client database or client relationship management applications, particularly those needing to comply with Basel II, Know Your Customer and Anti-Money Laundering, as well as Sarbanes-Oxley and the Patriot Act in the U.S.
CounterpartyLink is fully owned by the same owners of data management company Cicada. Joining the company as its managing director is Christoph Lammersdorf, former managing director of the Information Services division of Deutsche Börse, This may come as no surprise to some, as Lammersdorf gave Cicada its big break when the company launched back in 1998 by signing a lucrative multi-million dollar deal for its Composer platform to underpin Deutsche Börse’s information product line.
Lammersdorf says, “The data itself is not rocket science, and some of it is publicly available, but not always in the right format or linked in a useful or accurate way. And not all of the information is available officially. The essence of CounterpartyLink is the knowledge and skills of our analysts, combined with the processes and data management procedures we’re implementing.
“We’ve taken the expertise of the co-founders to guide the analysts. The analysts themselves are not just data entry people; they have to be smart and understand the corporate set up and regulation as well as where to get the information necessary to meet the requirement of an institution’s internal auditors and regulators.”
The issuer entities (and the related hierarchy data) covered includes corporations, funds and fund managers, financial institutions, governments, and most other common entities and their immediate, intermediate, and ultimate parents. The issuers will be monitored continuously for corporate actions that might affect any content. For this, the company is currently evaluating corporate actions data providers and expects to use a selection of them.
Lammersdorf says the service will focus on uniform data rather than deeper customized data. This is based on the understanding that most firms are looking primarily for the direct and ultimate partner data only. For any more specific information such as full trees and full links, which is usually related to each firm’s specific risk exposure, CounterpartyLink will refer clients to its partners.
Data alone, however, is not enough, according to Lammersdorf. Customers are required to disclose the process they use to obtain data in order to satisfy corporate governance guidelines and so they need a full audit trail. “This is our IPR. Internally we are using sophisticated software, Composer Workplace, which has been developed by Cicada, and is the only mechanism our analysts can use to input data. This way we can ensure they are following our defined data collection process, like noting its source, backing up a weaker source (such as the Internet) with a second source such as calling the company’s investor relations manager or lawyer.”
The company is targeting the top 20 institutions by size, and focusing initially in London and New York. Lammersdorf says they expect larger firms to need between 100,000 and 500,000 entities covered, while smaller firms will need between 5,000 and 10,000. The service will be offered with an annual subscription, with pricing based on the length of subscription, number of entities, frequency of updates, and breadth of customers. As an example, he says that smaller customers can expect to pay around $20 per entity per year. Upon subscribing, customers will receive the full load of data, and will then receive continuous updates of changes through the year based on their individual profiles.
CounterpartyLink, eager to establish itself as an independent entity, despite its link and use of Cicada services, is also planning discussions with other distribution partners that could be considered competitive to Cicada. Lammersdorf says an unexpected result of the company’s presence at the FIMA industry event in New York two weeks ago was the interest from other data management companies in its data offering. As such, it plans to enter discussions with players like Accenture, Asset Control, Capco and Goldensource. He also says the Crosswalk venture is one he wants to explore, as “Dun & Bradstreet are not exclusive and we believe Telekurs’ clients will want the full range of data available in such a service.”
The need to be seen as an independent entity from Cicada was considered essential by Lammersdorf in order to make it a success as a data company, and was a condition of his joining, and so Cicada spun-off the idea into the independent company.
But the foundation of the company is based on the experience of Cicada with clients such as Deutsche Bank, Bank of America, AIG. And to establish itself, CounterparyLink is buying services from Cicada until there are revenues to support its own. These services include data quality management and the ongoing development of the Workflow software.
Scaling up quickly, and with obvious sizeable but undisclosed funding behind it, CounterpartyLink already has 45 data analysts in India, 15 in Romania, and has plans for more in Egypt this Spring, China in the second quarter and Mexico in the second half of this year. Although these regions are often looked to for cheap labour, Lammersdorf says it also provides local language skills and a cultural understanding that are necessary for the job.
By adding the resource being leveraged from Cicada in the initial stages of growth – such as 40 data quality managers in Oklahoma and technologists in Hong Kong – CounterpartyLink has 200 data analysts at its disposal.
Lammersdorf himself has spent the past two years involved in reference data at Deutsche Börse. “The real-time data business is now saturated and I wanted to find ways for Deutsche Börse to generate new revenue. We looked at both securities data and counterparty data.” While Deutsche Börse decided to leverage its strength in securities data, Lammersdorf says they saw the appeal in counterparty data and planned to revisit it.
Not short of ambition, he says the dream is for CounterpartyLink to one day become a standard that is widely used throughout the industry and trusted by regulators (who they talked to in preparation for the launch) that might ease the audit and regulatory process.