Getting in on the business entity data act, FT Interactive Data Europe has teamed up with Avox (formerly known as Azdex) to link issue to issuer and parent data. The deal brings them into the competitive realm of the likes of the Crosswalk joint venture and CounterpartyLink, and is in direct response to yet another looming regulation, UCITS III – the European Commission’s Undertakings for Collective Investments in Transferable Securities (UCITS III) directive.
FT Interactive Data is making the linked data service – combining its own securities data relating to issues with the issuer and issuer’s parent data collected by Avox – available as an optional module within its flagship FTS portfolio administration data service.
The vendor began looking to develop such a data product last summer, primarily in response to requests from clients who were planning for UCITS III. Given the rise in the number of players in the business entity space, FT Interactive Data opted to partner rather than build their own data collection operation and so evaluated a number of external suppliers before choosing Avox as its partner.
Darren Marsh, FT Interactive Data’s European product marketing manger for end of day services, says, “(Business entity data) is a very complex and specialist area and one that we didn’t have any experience in to date, so we needed a partner. Corporate actions alone cannot be relied on to capture all of the changes that occur either to an individual business entity or within a corporate group’s organizational structure.”
The deal has enabled FT Interactive Data to offer the essential links data required by a financial institution looking to truly understand its exposure to any particular parent organization. This is essential to firms needing to comply with the UCITS regulation, which requires them to calculate and maintain, within given limits, their exposure to parent organizations. As such, business entity data is becoming increasingly sought by risk management and compliance departments.
Says Ken Price, chief executive officer of Avox, fund managers are not permitted to hold more than 20% of issues – equities or bonds – from a single issuer, or 40% of similar issues on a fund by fund basis.” Technically, the process of concentration risk management is referred to as ‘group notion’.
But it is not just UCITS that is putting business entity data under the spotlight. Other regulations like Basel II and MiFID (MiFID Monitor February 2005) are also likely to fuel demand for this data.
Price says that interest in the service is not limited to Europe. “We’ve had interest from all over by firms wanting to understand their total exposure.”
For FT Interactive Data, it was Avox’s use of contributed (anonymously) and verified data from its large sell side clients that was a compelling factor in its offering, says Marsh. The relationship is not exclusive and as such FT Interactive Data is planning to “partner with other companies as needed”. At the same time, the companies are exploring the opportunity for Avox to redistribute FT Interactive Data’s securities data to its clients, although it is early days in the discussions.
For the business entity data service, FT Interactive Data takes a list of securities from its customers and passes the relevant data onto Avox. Says Marsh, “Avox then researches the business entity data against the issues and returns a subset of 10 or so fields, such as full legal name of the entity and entity parent, registered address and legal form of a company.” He adds that the company is looking to add a mapping function that would allow clients to use their own proprietary identifiers to request data.
FT Interactive Data intents to offer its “auto-matched, hand researched business entity data service via FTS on a per entity request basis”. The service will be priced based on each customer’s unique number of issuers. The service will be monitored on a daily basis.
Bob Cumberbatch, FT Interactive Data’s European business lines director, says “UCITS doesn’t discriminate by asset class so we are preparing for more issue types”. This could mean an expansion of the service from its primarily equities focus into fixed income securities. Avox, which is now 51% owned by Deutsche Börse (Reference Data Review, September 2005), currently covers around 500,000 legal entities, and ratios of one issuer to two or three issues are common, resulting in a total of one to one-and-a-half million issues covered. Avox, as Azdex, was one of the early players in the business entity space, a space now occupied by Crosswalk (a joint venture between Standard & Poor’s, Telekurs and Dun & Bradstreet) and CounterpartyLink. The new name has no particular meaning but takes advantage of a trademark name long-held by Deutsche Börse.