Given that the Office of Financial Research has been a hotly debated topic within the industry of late (even if the regulatory community has been rather quiet on the subject), it is no surprise that vendors are keen to offer their services to those charged with establishing such a data utility. One such vendor is EDM specialist GoldenSource, which has been sitting on a panel with IBM to discuss the development of the utility for some time, explain CEO Mike Meriton and Tom Stock, senior vice president of product management.
The vendor, which has just released a new data warehouse solution, is keen to put itself forward as a potential direct technology provider to the utility, once the dust has settled on the current reform bill. Of course, there is still a long way to go and Meriton is aware of the challenges and that any such project will require partners to be involved for the long haul.
“The laws first need to be passed and then a suitable organisational structure needs to be established, which is likely to take anywhere between six and 12 months,” says Meriton. “The development of a plan for how the utility will operate will take another six to 12 months. Moreover, once the utility has been established, there will need to be a phased approach to the securities that are put onto the system and this will require prioritisation of different categories. It will likely be several years before all of this becomes a reality.”
However, despite the scepticism of others in the market, Meriton is convinced that the utility will see the light of day. “If you go out 30 years from today, the argument of rational execution is that there will be common numbering codes for securities and counterparties. However, at the moment it remains inconsistent and challenging for the market and that means a long market of opportunity for vendors such as ourselves,” he explains.
Even when the utility has been established, Stock reckons there will still be issues within the management of data that will mean vendor solutions will still have a place in the market. “Firms will still have issues internally of dealing with multiple systems, reference data standards is only one piece of the overall puzzle,” he says.
It is this argument that many against the idea of a utility use as reason enough for legislators not to impose potentially arbitrary standards on the industry. The fear of the addition of more standards to further complicate the overall picture is present within the market, after all. Some vendors have also been reluctant to back the idea given its potential impact on their business models.
Regardless of the development of the utility, however, Meriton reckons the data management solution vendor community is due for a shake up in the coming years. He points to the economic cycle as one that will gradually lead to a consolidation of those on the market. “We are currently at the stage of early mass adoption of data management solutions as a result of regulatory and client pressure. We have to spend less time evangelising about data management and more time proving speed and ROI,” he explains.
Stock adds: “There has been a shift from data management being seen as a purely nice to have strategic initiative to becoming a core infrastructure component for financial institutions. Data management is now a core competency.”
The next logical stage, says Meriton, is therefore consolidation. He groups the current vendors on the market into four distinct categories: traditional EDM vendors such as GoldenSource, Asset Control and Eagle; more recent entrants such as SmartCo and Cadis; data vendors with solutions for data management such as Thomson Reuters; and data service bureau solution vendors such as Broadridge. “It is my belief that while we have quite a few vendors in each category at the moment, this will be consolidated down into one or two strong providers in each category over the next few years,” he says.