The increased use of exchange traded funds (ETFs) and other similar synthetic instruments for the purpose of leverage or hedging has put stress on the reference data function, said Rob Flatley, CEO of EDM outsourcing solution vendor Netik, at FIMA last week. The buy side’s move to trade property is also causing challenges because most firms’ architectures are not designed to support the data requirements for these asset classes, ditto for debt related instruments, he added.
The level of detail required and the volume of information that must be stored for these instruments is putting pressure on firms’ back offices, said Flatley, who joined Netik earlier this year. “Firms need to develop a good strategy around dealing with the data related to synthetics, as well as altering their systems to cope with real estate products,” he said.
Increasing the timeliness of data is a challenge for firms, but it is also about understanding the workflows of the data underlying various products and processes, he contended. “Liquidity metrics have become increasingly important also, so reference data and analytics need to be better connected in order to meet regulatory and business requirements,” he said.
Of course, Netik is not without its own vested interest in this space: it offers solutions in the index and ETF space and Flatley was recruited specifically to improve its range of offerings in this area with his recent front office experience at Deutsche Bank’s Autobahn Equity division. The logic being that the new management team hails from the front office user community and hence has a better insight into the downstream requirements of a data management system.
To this end, Flatley reckons the result of any project implementation should be a reduction in operating costs or a significant return on investment, proven via clear qualitative and quantitative metrics. This was his experience as a front office end user and it is likely the one that data managers have to deliver upon, he said. He also indicated that the industry is much more accepting of offshoring and outsourcing, or a combination of both, than before, which has resulted in Netik taking over some offshoring contracts for clients. Managed services can be a way of de-risking a move away from legacy technology platforms, he contended.
Flatley reassured delegates that Netik has the capability to provide rigorous service level agreements (SLAs) in order to ensure it “puts its money where its mouth is” in terms of meeting their requirements for data quality. A claim that the vendor has long been proudly stating at industry events to prove its mettle in the increasingly competitive data management market.