The numerous challenges standing in the way of establishing industry wide data infrastructures such as data repositories for the OTC markets and achieving greater standardisation of the corporate actions space were elaborated upon by a number of speakers at this year’s Sibos. The challenge of standardising this data on a firm wide level is multiplied exponentially when attempting to achieve this across the industry, agreed panellists including Roger Harrold, managing director and global head of domestic custody at Deutsche Bank, and Alan Cameron, head of sales and relationship management at BNP Paribas.
During the securities post-trade infrastructures sessions on the first day, for example, panellists debated the future of the plethora of projects going on across the globe to establish trade repositories, clearing counterparties and settlement infrastructures such as Target2-Securities (T2S). BNP Paribas’ Cameron highlighted the serious issue of determining what the industry wants these infrastructures to provide and the need for some level of agreement across the market about the functions they will fulfil.
However, panellists disagreed on the subject of whether one or multiple repositories should be created for OTC data; thus indicating that reaching consensus on the issue will be tricky. Harrold called for single, global repositories of data for each asset class to provide a single source of data, but accepted that this would be easier said than done. “Before any of this can happen there needs to be much more clarity around access to this data for non-domestic regulators,” he elaborated.
Much the same as for a reference data utility, OTC data repositories will potentially be very expensive to maintain and may run into legal challenges around data sharing and ownership, as well as representing a single point of failure from a systemic risk perspective. The European Central Bank’s (ECB) Jean-Michel Godeffroy, who is director general and chairman of the T2S programme, conceded that infrastructure building is not a simple business and should the industry demonstrate an interest in establishing its own solution, the ECB would be quick to accept it. He pointed to CLS in the FX market as a successful example of the industry acting upon its own initiative.
The potential for the industry to act under its own steam in the area of data standardisation, however, is increasingly unlikely, if Sibos delegates are anything to go by. During a vote, the majority of the audience members indicated that they were in favour of regulatory intervention in the standardisation effort. Much like reference data standardisation, there seems to be a desire for regulators to compel change by whatever means necessary in the post-trade infrastructure space in general.
However, that is easier said than done, as Godeffroy noted that before the regulators can take action, they would need to be on the same page as each other. “There may be a tendency in the market to attempt to create more and more globally focused infrastructures, but there is still no global mandate or agreement amongst regulators,” he said.
The corporate actions world is facing a similar dilemma, with a lack of compulsion to move to ISO 20022 and XBRL tagging without a regulatory mandate. During one of the many corporate actions panels at Sibos, Anthony Depalma, managing director at global custodian Brown Brothers Harriman (BBH), indicated the need for the “flawed” corporate actions process to be addressed as soon as possible. Neil Daswani, global head of securities services at Standard Chartered, added that rather than playing a “blame game”, the industry needs to move forward with change.
BBH recently announced its involvement in the Swift corporate actions pilot programme as one of the select group of custodians to test out the viability of ISO 20022 messaging and XBRL tagging in this context. Depalma highlighted the potentially high cost of missing a corporate action as a key driver for getting involved in the standardisation initiative. He discussed the recent record breaking Petrobras rights issue at the end of September to elaborate upon the potential cost of getting a €52.5 billion corporate action wrong.
Depalma also noted the danger of all players in the corporate actions processing chain developing their own version of a “golden notice” and layering these on top of each other. Standardised messaging formats and identifiers could rid the industry of this problem, he said, hence BBH’s decision to work with Swift, DTCC and XBRL US to this end.
Initiatives such as this are only one part of the equation, however, agreed panellists. David Kane, managing director of custody operations for Worldwide Securities Services at JPMorgan, indicated that regulators have a major role to play to push the standardisation agenda and to compel issuers to adopt these standards at source.
It seems therefore that the industry is in favour of some level of global infrastructure, with a side order of regulation. Whether it’s happy with the service it receives, however, is another matter entirely.