The London Stock Exchange (LSE) has revealed plans to migrate its centralised reference and financial data management solution, Sedol Masterfile, onto UnaVista, its global matching, reconciliation, data integration and validation service. The exchange operator has also launched a new service for the central matching of post-trade data across prime brokers, executing brokers and hedge funds on the UnaVista platform. Mark Husler, head of business development for data and software at LSE, tells Reference Data Review the details.
This month, Sedol Masterfile will migrate to the UnaVista platform, which LSE says will allow its customer base to benefit from enhanced new web-based data enquiry screens. UnaVista will provide a platform to aggregate and clean reference data across multiple data feeds sourced from data vendors, financial institutions, global numbering agencies and direct from exchanges.
Husler explains the background behind the migration: “In 2003, when we did a system upgrade for the Sedol system, we actually used the UnaVista application, which is an online web-based reconciliation service and matching engine, to manage all the data cleansing as we were moving data from very disparate sources internally into the new Sedol system. We continued to use UnaVista for reference data in 2004 to reconcile data from different data vendors and data from our global customer base to help us with the allocation of Sedol codes. The next generation of Sedol will involve us moving the Sedol Masterfile data onto UnaVista rather than using it as a supporting system. We will be using it as the engine for allocating and maintaining Sedol codes going forward.”
This will enable the existing Sedol database coverage of 2.5 million securities to expand by an additional 1 million global exchange traded derivatives and new global fixed income products. Husler says: “One of the reasons for this is that it provides us with a flexible and strategic platform from which to launch a number of products later this year and the first quarter of 2009. It will also allow us to increase the size of the Sedol database. One of the key areas for us off the back of this Sedol launch in September, we will be providing Sedol codes for in excess of a million global exchange traded derivatives contracts in the fourth quarter of 2008, which is a whole new asset class for Sedol allocation.”
There are two primary drivers for the move, firstly to extend Sedol’s database coverage into other asset classes, explains Husler. The second is to provide customers with more technical solutions via which to access LSE’s data. “At the moment we supply our customers with quite large change files by which to update their systems but what UnaVista will provide is the ability to interact with the database in a more dynamic fashion. This will include launching an API interface to allow customers to interrogate and update the Sedol Masterfile database automatically in real time,” he explains.
The theory behind this is that because UnaVista is an online application it will allow customers to validate their own reference data systems against the exchange’s Sedol Masterfile to discover data discrepancies. “It is those types of services that we have had a lot of positive feedback on over the past year,” Husler adds.
“This fits into the core strategy of the exchange to expand the range of services we offer our customers, with the Sedol Masterfile quadrupling in size over the last four years. We have been focused on ensuring that Sedol codes cover all global securities and all asset classes. We now have in excess of 1,400 global customers subscribed to the service and it is certainly core to our strategy,” he continues. “This next of stage of development takes us to a new level and because Sedol codes are used across many middle and back offices in the industry, it will provide our global customer base with greater standardisation.”
The LSE says it is trying to assist its customers to increase standardisation beyond fixed income and equities by helping them to increase STP and the first area of focus is derivatives. The fact that this is a new area for LSE will provide its fair share of challenges, says Husler: “Derivatives are very different to our traditional coverage and we have had to focus on different data attributes than you would with equities. It is something that we have spent at least two years looking at behind the scenes to ensure that we have the capabilities to provide full global coverage. It has taken a lot of planning on our side to ensure that the output will be global coverage of exchange traded derivatives on day one.”
The technical migration has taken around six months in total and has been fairly straightforward, says Husler. “Phase one with the launch in September is to provide the web-based service to our client base to allow them to request the allocation of codes. The aim is provide customers with enhanced web screens for reference data enquiries and ISIN and Sedol allocations. However, the future enhancements are where the true value comes through – the expansion into other asset classes and the launch of new technical solutions.”
The expansion plan is over six months from October through to April, when LSE will be launching the value added products. “Over the last six months there has been an awful lot of data preparation and background technical developments going on for these new products,” Husler says.
In terms of competition, Husler explains that the model of the LSE is to cooperate rather than compete: “A lot of data vendors carry our data and these vendors will have access to the expanded data set and they will continue to have the rights to carry it in their products. When you talk about competition, you have to put it into the context of how our model works. We supply end users directly but we also have good relationships with all data vendors that carry our data.”
In July, the LSE announced the launch of the UnaVista Broker Matching Utility (BMU) a central matching service that allows exception monitoring through a browser-based dashboard. The exchange operator says that the BMU provides independence from specific data formats with the ability to handle multiple data standards.
UnaVista BMU recently launched its pilot service and indicates that the full service will be available to prime brokers, executing brokers and hedge funds from the fourth quarter of this year. “UnaVista is asset class agnostic and as such the BMU will use the same core technology as Sedol but for a completely different solution,” says Husler.
At the moment a lot of manual processes take place in the post-trade matching process, particularly between when prime brokers and executing brokers match trades originating from hedge funds, he explains. The aim of the utility service is to provide the community with the ability to centrally match trades between each other across a multitude of trade types.
“BMU effectively will take in the two parties’ trade data and will automatically match the relevant information to assist them in focussing resources at trade exceptions,” he continues. “We initially started speaking to customers about the service at the start of the year and that led to six months of consultation and system development. We are currently working on a pilot phase with our customers to provide the initial matching results and to gather their feedback to expand the system functionality”
The benefits of operating both services being on the UnaVista platform is that the post-trade matching conducted in BMU will include instrument reference data so there is the opportunity to assist customers in validating this information against the global Sedol Masterfile database, Husler contends. “Unfortunately a large percentage of failed trades are due incorrect reference data so allowing customers of the BMU to validate their security static data against the Sedol Masterfile will help to correct these issues early on in the trade lifecycle.”
Husler sums up what he sees as the main benefits of the UnaVista platform for LSE’s clients: “Unlike our competitors, UnaVista is a hosted service, meaning it is fully hosted at the exchange’s data centre. As such all the hardware resides within the exchange removing the requirement for customer to locally deploy any hardware or software so they simply interact with a web based front end and can transfer data using a choice of industry standard protocols. A lot of the competitor products are local installation products and as such the time to market for our service is much simpler and quicker. We can deliver UnaVista to our global client base through a simple online registration process.”