The breakdown of the time spent on each area for discussion at yesterday’s MiFID Forum was indicative of the general press and industry attention that is being given to certain aspects of MiFID over others. The majority of the presentations focused on the front office and market data impacts of the directive’s revisions (with good reason, to be fair, in the case of a consolidated tape), but little was said of the reference data and back office impacts. The development of a legal entity identifier got a brief mention, but nothing was said of the Office of Financial Research developments in the US and how these could potentially impact European data standardisation.
One could argue that a lot of these discussions are being conducted at the individual subject group level – with the transaction reporting group taking the reference data aspects into consideration. But, given the next meeting of this group is not until late January or early February, by which point a number of important decisions will have been made in the entity identification space (Swift’s statement of intentions, the drafting of more detailed entity data related plans in the US, potential action by the European Central Bank in Europe), this may be too little, too late.
There really needs to be a proper discussion about the global impacts of these standards initiatives beyond just those in the data management sphere. It will impact the business, after all; just look at the responses earlier this year to the Committee of European Securities Regulators’ (CESR) proposals regarding client identification for proof. The British Bankers’ Association (BBA) and Xtrakter Transaction Reporting Working Group, for example, raised the issue of the “large start up costs and ongoing maintenance costs” of collecting client identifiers. And we all know that a price tag is always of interest to the business.
Moreover, if, as indicated by Dario Crispini, manager of the Transaction Reporting Unit of the UK Financial Services Authority (FSA), at the last meeting of the subject group, the regulator is planning to tighten scrutiny of data quality, then proper selection of data standards could be vital in keeping costs from spiralling. Making sure the regulatory community opts for the right standards for the business is key to ensuring that more duplicative and costly cross-referencing is not required.
Regardless, entity identification will pose a serious challenge for the industry and regulators, should they choose to go down the utility route. The release this week by the UK Office for National Statistics that a record 55,100 London-based businesses failed last year (around 150 a day) is indicative of the scale of the challenge. And that’s only London. Keeping track of this data and the many corporate actions events going on in order to monitor systemic risk and have a handle on the entities out there in the market will be no mean feat.
But discussions about the impact of all of this need to happen more quickly than they are at the moment. There seems to be more of a sense of urgency about discussing the Swinburne report and MiFID’s impact on high frequency trading than there is around data. It may not be as glamorous a topic, but it’s an important one.
PS – For those of you interested in the list of topics up for discussion at the next transaction reporting subject group, Alan Jenkins, independent consultant and chair of the group, indicated that three issues are on the agenda: the introduction of the new “client facilitation” category for transaction reporting; client identification; and the details of OTC derivatives transaction reporting.
Also – see below for the latest summary of the Office of Financial Research plan of action from the Federal Register last month. It indicates that firms that wish to provide feedback to the proposals must do so by 31 January 2011. TIME IS RUNNING OUT!