A major hurdle to achieving a consistent view of pricing, positions and exposure lays in the divide between market data feeds and reference data repositories, according to GoldenSource, a provider of enterprise data management (EDM) solutions.
“By definition, enterprise risk management and reporting should go front to back as well as across assets,” says Gert Raeves, vice president of strategic business development at GoldenSource. “A trusted data environment for interdependent front and back office processes now relies on the centralisation of market and reference data. With market data, there is a convergence point where a snapshot of the market can be captured and validated for downstream applications.”
Pricing mechanisms in the front office and valuations for P&L in the back office often depend on the same price and rate data, yet both areas derive this information from disparate sources. According to research from consultancy A-Team Group, 87% of risk managers are interested in centralising market and reference data. This is to address issues including volatility, accuracy, consistency and the elimination of asset-based silos.
Unprecedented market movements are impacting portfolios, customers, counterparties and issuers faster than ever, meaning back office risk and P&L systems can no longer wait until end of day to access critical market data. Regulators are expecting much of the same data used in the trading decision process to be extended to valuation, P&L and risk management, thus bringing the same issues around accuracy and consistency to both data areas.
Regulatory and client demands for insight into how a value was derived means that golden copy pricing needs to extend beyond static reference sets and include multiple market data sources, says the vendor. Furthermore, siloed desks have traditionally been blamed for the inability to get a complete view of risk and exposure; these silos are now being broken down, yet the divide between market and reference data persists.