Earlier this week, the London Stock Exchange (LSE) announced that it has commenced a joint venture with data vendor FactSet Research Systems to add its entity data to the UnaVista platform. Mark Husler, head of information services business development at the LSE, explains the details of the deal to Reference Data Review.
Under the partnership agreement, the exchange will deliver FactSet’s reference data via its web-based platform UnaVista, which provides validation, matching and reconciliation solutions. “UnaVista is a hosted data management service that is based at the LSE,” explains Husler. “We use it as the same technical platform for all of our historical data products and our reference data business, Sedol Masterfile. In addition to that we also sell the service to customers to manage their own data – that could be, for example, cash and stock reconciliation or it could be reference data management or system to system checks. It is basically a reconciliation platform with a built in workflow processor for managing high volumes of data from different sources.”
On Sedol today, the LSE has somewhere in the region of 10 million securities, covering global, multi-asset class, exchange traded and OTC products. “We have a very large repository of reference data that we manage and we are the national numbering agency for the UK. As well as allocating Sedols and ISINs, we also store a lot of static data on the issuers and all of the securities they put into the market globally. One of the gaps that we had in our database was how the issuers themselves relate to their parent companies and their ultimate parents,” he continues.
The vendor spoke to its clients on Sedol who already receive reference data with the securities mapped to the issuer and Husler says it became apparent that what they would like LSE to provide was that next level of data up: how the issuer itself maps to all of its parents. The appeal is all about firms understanding their exposure either to an individual issuer or a family of issuers. “Without understanding all of those hierarchies, it can be troublesome to understand a risk position at any one point in time,” he explains.
Accordingly, these firms will now be able to receive FactSet’s issue to issuer linkage data and parent-subsidiary relationship data via the UnaVista platform. UnaVista will reconcile the data against the LSE’s Sedol Masterfile and the firms’ own systems. The vendor claims this will therefore reduce the firm’s risk exposure without the need for manual checks.
“We decided to partner with FactSet on this because they have a very high quality global database that provides all of those linkages. We are offering to clients a combination of the exchange’s own Sedol Masterfile database with reference data linkages at the security to issuer level combined with FactSet’s database which has the issuer to ultimate parent linkages,” says Husler. “The clients that we originally spoke to wanted us to benchmark data analysis across the vendors in the space and in our opinion FactSet ranked very highly in both data coverage and quality.”
However, there are quite a few providers in the space and UnaVista is vendor neutral so Husler indicates LSE is not aligning itself to any particular vendor. “Clients may prefer to have different suppliers of data and as a software service provider we will adapt to whatever data vendors customer prefer,” he explains.
According to Husler, it was a very quick integration process: “We first started speaking in the fourth quarter of 2009 and within a matter of months we had integrated the data and signed the commercials. We are now in live service delivering the product to clients.”
The first firm to road test the joint venture is an international bank, who signed up to UnaVista’s service earlier this month. The LSE claims the bank chose UnaVista because of its ability to integrate and reconcile data from multiple sources quickly, with no hardware costs. The logic is that as UnaVista is a web-hosted system, firms don’t have to invest in expensive new hardware to run it.
Husler is confident the appeal of the joint solution will be apparent to the market: “We have a handful of clients using the service at the moment but we have a very large client base on the Sedol business, so the opportunity is to provide all this additional content to those clients over the coming months.”
Although there are a lot of different providers of this data content, Husler reckons the exchange stands out from the crowd because typically this content is provided in a data feed format. “Because UnaVista is a reconciliation platform hosted at the exchange, the service we are providing is pretty unique. If clients want to receive just a data feed that is easy, but where we add a lot of value is that we allow customers to send in their own content for validation against with our Sedol or FactSet information to provide exception reports. Or, from a compliance perspective, where clients want to manage a restricted list of securities that they want to block for internal reasons they can provide us with a list of instruments on a daily basis and we can highlight the full family of securities that are owned by the ultimate parent,” he elaborates.
The strategy for the rest of the year, says Husler, is to continue providing high quality reference data on all global securities, both on and off exchange, linked to UnaVista to offer clients solutions to remove the requirement for large data integration projects. The LSE is also keen to provide a variety of different solutions on one single technical platform in UnaVista, beyond just reference data.
“Clients are currently using the platform for reconciliations, whether that is cash and stock or system to system, which has been live for two years and is a growing business. We are also in advanced discussions with tier one brokers and large buy side firms around expanding the service for trade confirmations. The focus is on confirming faxes with a number of European and Asian clients to bring down the costs by bringing them onto an electronic platform,” concludes Husler.