Industry participants are concerned about the availability of the quality data they require to achieve straight-through-processing, according to a survey published last month by the U.S. Securities Industry Association and GartnerG2, a research firm. The survey also found high levels of concern about the deadline for the Depository Trust & Clearing Corp.’s proposed corporate actions liability notifications hub.
The survey’s findings underscore the importance of reference data in the initiative to achieving STP. They also appear to point to a continuing lack of industry standards with respect to securities descriptive data.
The SIA/Gartner survey was conducted in April and May of this year, with the results published in July. The publishers received responses from 184 financial services companies in 23 countries worldwide.
Respondents identified data quality as an area of concern. Asked to rate on a scale of 1-7 their concern about data quality in the area of clearing/settlement, trading and risk management, respondents assigned a rating value of 4.4. They gave similar ratings to concerns about data relating to application integration (4.4) and security (4.4).
The 4.4 rating compared with a rating of 4.9 for the issue identified as generating the highest level of concern: overall costs associated with achieving STP. Associated issues, such as the lack of messaging standards and data storage, registered lower levels of concern, with ratings of 3.1 and 3.2, respectively.
Meanwhile, firms said – perhaps unsurprisingly – they were unprepared for the DTCC’s proposed corporate actions liability notifications hub. The initial plans for the hub were outlined earlier this year (RDR, June 2003); a more detailed blueprint was published in early summer (RDR, July 2003).
The survey found that “Response is … low regarding preparedness to interface with the new DTCC corporate actions liability notifications hub. Nearly 70% of respondents had not started their corporate actions liability hub project to meet the 30 June 2004 target date. Concern with the deadline is relatively high at 37%.”
The DTCC’s blueprint calls for the development of a centralized data cleansing and hub-based messaging system for corporate actions. Among the core proposals are:
· Standardizing corporate action announcement information to ensure the availability of consistent, accurate information;
· Automating the creation and dissemination of corporate action announcements to eliminate manual processing and simplify communications;
· Promoting standards and best market practices to streamline processing;
· Promoting the automated exchange of instructions to reduce risk and cost; and
· Eliminating the use of certificates in the handling of corporate action transactions.
Among other key findings, the SIA/GartnerG2 survey found that executives remained unconvinced of the value of a central trade matching utility, a key proposal of the long-postponed T+1 initiative. It also found that among the 184 firms surveyed, 42% of all transactions continue to be paper-based and almost 40% of firms manually enter data at least twice for the same transaction.