Mike Atkin, managing director of data management industry group the EDM Council, has long been a proponent of the idea of a global reference data utility and he noted in his recent update to members that the process of drawing up the requirements for a legal entity identification as part of the US Office of Financial Research (OFR) is well underway to this end. EDM Council is one of the 15 associations that are working with Sifma and the US regulatory community to hammer out the final list of requirements before a request for proposal (RFP) and selection process is kicked off for the registration body and technology provider for the utility.
Atkin explained that the desire to track systemic risk within the regulatory community will result in “short term pain but long term benefit” for the industry as a whole by mandating new data standards. He also indicated that the regulatory activities are “tightly coupled” across the globe (although this may not be as coordinated as it appears) and US, European and Asian regulators are discussing the issues around setting a new legal entity identification standard. The OFR has already hired a number of key staff, although a director has yet to be appointed, and these new staff members are well known to the members of the EDM Council (likely originating from the academic community).
He described the pace of change with regards to regulation as “frenetic”, noting that 224 regulations are in the pipeline for the US over the next 24 months. Atkin also dismissed ideas that the OFR will fall off the regulatory radar, stating that it is already enshrined in law and has an executive budget, rather than one defined by Congress, so will not struggle with regards to funding in the short term. However, this does not take into account the activities of lobbyists, who could potentially derail some of the Dodd Frank requirements. Although it remains to be seen whether the OFR plans will be targeted by any of these activities or affected by backpedalling by those in government quarters.
For now, the industry group is aiming to work with the other associations in the 15 strong group in order to align its members in a common understanding of the basic requirements of a legal entity identifier and, further down the road, instrument identifiers. Sifma has retained PriceWaterhouseCoopers to capture all of the requirements for a legal entity ID, but there are a number of outstanding issues that must be reconciled between the industry and the regulatory community’s requirements before any action can be taken with regards to setting an implementation timetable.
Atkin noted that instrument identification could prove an even trickier fish to fry due to the number of standards already present in the market already. The deadline with regards to this work, which has also been set for July, is therefore likely to slip. The EDM Council view is that a dumb number from the “seller” of these instruments will need to be used to identify OTC derivatives and suggested that the association’s own semantics repository could be used in the creation of a registry for these instruments. He also noted the potential of XBRL in the US market for the tagging of contractual documents in order to track data along the supply chain from the point of issuance (something that is already being mooted for the corporate actions space).
With regards to the semantic repository, he referred to the recent tie up with the Object Management Group (OMG) in order to ensure it remains sustainable by providing a formal governance framework in which the repository can sit. “The repository is complete enough for firms to use as internal reference key now and a number of members are already doing internal mapping and content evaluation,” he added.
The industry group has also been working on its Data Management Maturity (DMM) model for some time, alongside the Software Engineering Institute (SEI) of Carnegie Mellon University (CMU). The plan is to now further enhance the basic core DMM framework that has been set out and the group has set a deadline of May 2011 by which to develop the core content model. It is hoped that it will eventually be used as a benchmark against which members can judge their data management journey.
The EDM Council’s data quality working group, which was set up last year, has also aligned its work and vice versa with the DMM developments. Its current objective is to create a shared data quality rulebook based on the semantic repository and reflect industry best practices with regards to data quality assurance. The group is also currently working on a proof of concept using ISIN data with regards to measuring data quality and alignment.