DTCC’s joint development of a client entity reference data utility with a number of global banks is expected to yield first results early next year, with an initial release of a client reference data service to be followed by further releases through the year.
The company has signed a memorandum of understanding (MOU) with a group of banks, including Barclays, Credit Suisse, Goldman Sachs and JPMorgan Chase, to develop a utility and reference data service that will meet regulatory and other business requirements, but precise details of the venture and prospective partners are sparse at this stage.
Michael Bodson, DTCC president and CEO, says: “Our ultimate aim is to support the industry’s call for a comprehensive, centralised platform to effectively manage virtually all client reference data. We are pleased that we have an MOU with a group of the industry’s top multinational participants. With their partnership and the support of our board of directors, we are moving forward aggressively to bring this solution to market.”
If that is the top line, there is still work to do to deliver a comprehensive entity reference data utility and service. DTCC suggests early releases will provide data to meet specific regulatory requirements, with the service developing over time to address additional client reference data requirements of banks and broker dealers, as well as those of asset managers and hedge funds.
Data earmarked for the service includes legal entity identifiers and their hierarchies, and compliance data for regulations such as Dodd-Frank, European Market Infrastructure Regulation, the Foreign Account Tax Compliance Act and activities around know-your-customer and client on boarding. DTCC’s existing reference data operations will also come into play, with Avox contributing cleansed publically available reference data to the service, and Omgeo adding data from its Alert database of standing settlement instructions (SSIs) that are used by both buy-side and sell-side market participants.
Matthew Stauffer, managing director of strategy and business development at DTCC, explains: “We have been engaged with a group of global banks and broker dealers for about a year, scoping out how to collect and manage client data, while considering the regulatory and operational challenges of an entity reference data service. The initiative is driven by our user board members and is part of DTCC’s overall corporate strategy as a market infrastructure provider. Its ultimate objective is to provide operational cost efficiencies for banks and broker dealers, and to remove barriers for providers of data such as asset managers, investment managers and corporate clients. It will address increasing regulatory requirements for institutional banks to capture the right data by achieving efficient capture and validation of data, and improving operational control and efficiency around data. ”
Peter Axilrod, managing director and head of strategy and business development at DTCC, adds: “Regulatory scrutiny on how firms collect and manage clients’ documents and data is increasing. This is making the process more complex. With banks under pressure to improve their control environments and become more efficient, an industry solution for client reference data is the best approach.”
From a potential user’s standpoint, Colin Hall, Credit Suisse chief data officer, investment banking, says: “Client service is of utmost importance to Credit Suisse and the enhanced client reference data resulting from this service offering will assist us in meeting client needs. We believe our collaboration with DTCC and other peer firms has the opportunity to deliver significant benefits to the broader market from control, regulatory and client service perspectives.”
DTCC will not name banks in the development beyond those stated above, or exactly how many are involved, but it is keen to stress that the entity reference data service is a global industry venture. Stauffer says: “We are developing an open platform and industry participants will be able to subscribe for services. The platform will be used to collect client and counterparty content through a controlled interface, then cleanse and maintain the data. It will eliminate duplication of this process across the industry and provide a better client service”
In response to a question on cost, Axilrod says: “This is an industry solution in a critical space of client data. If it is not less expensive and better than services developed by consumers it will not take off.”
With a broad solution scoped, DTCC is planning a release schedule and considering details of the utility, including its exact construction and its relationship with other reference data providers. On this issue, Stauffer says: “We need to understand how we can make the broadest possible solution for users of the DTCC service and we are working on this. We are talking to other infrastructure providers, but have yet to define integration and connectivity.” He concludes: “We need a model that supports both the sell side and the buy side, there must be value for both.”