In a similar vein to their discussions during last year’s Sibos panel on the developments around the Office of Financial Research (OFR), the European Central Bank’s (ECB) head of external statistics Francis Gross championed the cause of regulatory led reference data standardisation at last week’s TSAM alongside EDM Council managing director Mike Atkin. Gross noted that although some groundwork has been done in the form of the recent industry consultation on a legal entity identifier, much more of the “science bit” needs to be done first before real action can be taken and serious discussions about migration are key to this.
“The OFR is only just starting up and it is the beginning of a learning process for both the industry and regulators,” contended Gross. Atkin added that the creation of the OFR signals the start of an “age of transparency” where regulators are seeking much more comparability between data sets in order to achieve better levels of oversight and to monitor systemic risk, which therefore entails pushing the standardisation agenda forwards.
While the positive impact on data management that this focus on transparency is promoting cannot be denied (budgets are materialising to tackle data quality issues, for example), other speakers such as Chris Johnson, head of product management, market data services at HSBC Securities Services, sounded a note of caution about keeping a close eye on the “unintended consequences” of regulatory steps that are taken. The selection of a utility provider and a head for the OFR will both be important from this perspective in terms of preventing conflicts of interests and government sanctioned monopolies from a data provider point of view.
The process of determining which standard to use should be left to the industry, stressed Gross, noting that regulators are not best placed to make this decision. He also referenced a speech from February this year by Michel Barnier, during which the European internal market and services commissioner highlighted the need for the global community to work together to develop “a common system of identification for market players”.
In his speech to the European Forum in Brussels on 10 February, Barnier noted that the US has already begun down this road, but warned that “global standards” are needed for legal entity identification and that also involves working with other “major players” in the market such as Brazil, India and China, who up until now have largely been left out of the loop. The commissioner also noted: “Europe must be present and united on these issues, otherwise it is others who will set the rules that decide for us.” This position reinforces comments he made last year about the need for global coordination on tackling systemic risk oversight.
As well as Barnier, the ECB’s president Jean-Claude Trichet has also been reading from the same hymnbook as Gross and has made several references to the need for a “public reference data utility” over the last 12 months. Gross therefore reprised this theme last week and suggested that before moving from words to action, the industry needs to provide input to regulators about the standardisation challenges, opportunities and requirements it is facing.
There was some degree of debate within the room about how current, commercially provided standards could feature within the context of a regulatory driven utility. For example, asset managers in attendance seemed to be quite positive of the decision by Bloomberg to offer the new Bloomberg Global ID (BBGID) for free, although they were unclear about how these standards could be used within a utility. Gross suggested that these commercial vendors would need to work together fully collaboratively in order to feature in the final picture.
There was agreement, however, that if the regulatory community and industry is to use the ISO process for the development of new standards in this space, this process will need to be much quicker than the current five years for amendments to be made.
Gross and Atkin will be reprising these discussions during the upcoming meeting of the Object Management Group (OMG) and EDM Council in Arlington, Virginia later this month).