The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

Is the OFR Biting Off More Than it Can Chew?

Serious concerns have been raised about the capacity of the US Office of Financial Research (OFR) to be able to effectively process and number crunch the high volumes of reference and economic data that it will receive from the industry in order to monitor systemic risk. The influx of data inputs could potentially overwhelm the new Treasury agency and thus impede the tracking of systemic risk on a more granular level. The OFR (as well as the industry) could therefore be faced with death by data drowning.

Speakers from Sifma’s Operations and Technology Committee at the association’s annual operations conference in Florida this week highlighted the unstructured way in which reference data is provided and assessed at the moment by the regulatory community as a point of concern in this regard. Morgan Stanley’s global head of operations, technology and data, Stephen Daffron, noted that the current state of the raw data is not conducive to being fed into an analytics engine in order to track granular data such as parent/child hierarchies.

As the vendor community that has sprung up around the cleansing of reference data will testify, it is not a cheap or simple process to track this data at a firm level, let alone on an industry-wide basis. Daffron indicated three main points of concern: the sheer volume of unstructured data out there; the lack of consistency (of data itself and the OFR’s approach to that data); and the OFR’s intended approach to the challenge overall.

One of the fears raised frequently by industry participants over recent months is that the OFR will bite off more than it can chew at the outset. Daffron cautioned that a rushed approach towards collecting vast quantities of data was not the right track to go down, but that this seemed to be the way the OFR was progressing: doing “too much” in a space that is “too complex”.

His fellow panellists, JPMorgan managing director Jeffrey Bernstein, Raymond James Financial’s chief admin officer Angela Biever and the Depository Trust and Clearing Corporation’s (DTCC) COO Michael Bodson all noted that the agency is at the start of a long journey. A lot of lessons need to be learned first with regards to dealing with reference data. Good job then, that a practitioner and economist is at hand to assist.

It has been a few weeks since my last blog on the developments surrounding the OFR, during which time a new supervisor has been appointed in the form of ex-Morgan Stanley economist Richard Berner. So, it will now be up to Berner and his team to convince the industry that the agency will not go down the wrong path with regards to dealing with this data.

For now, I’d recommend small bites and regular checkups (with the industry) to ensure the OFR isn’t choked by too much data at the outset.

It is also interesting to note that Sifma, who is leading the charge with regards to providing feedback to the OFR on the legal entity identifier and other data standardisation concerns, chose a DTCC spokesperson to participate in its conference session on operations challenges and the OFR. Given that DTCC is pitching to be chosen as the technology provider to the new Treasury agency (alongside Swift as the registration authority for the new legal entity ID), is Bodson’s presence on the panel tacit confirmation of the association’s support for the DTCC’s bid? After all, DTCC is hot tipped to be the frontrunner in the race…

Expect these topics and many more to be up for discussion at our upcoming Data Management for Risk, Analytics and Valuations (#DMRAV – for you twitterers out there) in NYC in a couple of weeks’ time.

Related content

WEBINAR

Recorded Webinar: Entity identification and client lifecycle management – How financial institutions can drive $4 billion in cost savings

A new model in Legal Entity Identifier (LEI) issuance has created significant opportunities for financial institutions to capitalise on their KYC and AML due diligence. By becoming Validation Agents and obtaining LEIs on behalf of their clients, financial institutions can enhance their client onboarding experience, streamline their internal operations, and open the door to new,...

BLOG

AWS Adds Amazon FinSpace Managed Service Offering Data Management and Preparation for Analytics

AWS has released Amazon FinSpace, a data management and analytics managed service designed to store, catalogue and prepare financial industry data at scale, as well as reduce the time it takes to find and access data for analysis from months to minutes. FinSpace avoids the heavy lifting of building and maintaining a data management system...

EVENT

TradingTech Summit Virtual

TradingTech Summit (TTS) Virtual will look at how trading technology operations can capitalise on recent disruption and leverage technology to find efficiencies in the new normal environment. The crisis has highlighted that the future is digital and cloud based, and the ability to innovate faster and at scale has become critical. As we move into recovery and ‘business as usual’, what changes and technology innovations should the industry adopt to simplify operations and to support speed, agility and flexibility in trading operations.

GUIDE

Entity Data Management Handbook – Seventh Edition

Sourcing entity data and ensuring efficient and effective entity data management is a challenge for many financial institutions as volumes of data rise, more regulations require entity data in reporting, and the fight again financial crime is escalated by bad actors using increasingly sophisticated techniques to attack processes and systems. That said, based on best...