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Standards: Are They Worth the Effort?

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Much of the industry talk about reference data focuses on standards, and much work has been done to develop and propagate them. But is this work worth the effort? If the industry does not adopt the standards, they are, obviously, of no use.

ISO 15022 for corporate actions is a current example of a standard into which a lot of effort has been poured. But since its introduction last year, take-up has been disappointingly slow. Both vendors and exchange report low levels of interest from their clients for the ISO 15022-based data services that they are offering. As Swift’s Catherine Marks asked at a recent CityCompass corporate actions event, “Why?”

Surely the benefits of standards – improved operational efficiency, lower risk, lower costs, etc., etc. – should be enough to have the user community racing to implement standards?

But, the truth is that many users have their hands full with internal projects, particularly around upcoming regulatory deadlines. And implementing a standard, though it may in the long run address some of their current problems, is another headache they don’t need.

It’s not just a matter of taking a feed that provides data in a standard format. The client has to ensure that all downstream applications are capable of handling the format for it to be effective. There is also a ‘wait and see’ attitude among users who continue to monitor the ever-changing standards landscape.

Andrew Chilcott’s push to embed tags around data within Adobe Acrobat for regulatory reporting to automatically generate Swift-formatted messages is another example. It is a great idea and seems simple enough. But as he pointed out, despite the technical capabilities being there, market acceptance is a long way off.

This was illustrated at the CityCompass’ event, where the London Stock Exchange – an obvious place to start encouraging issuers to use such capabilities when reporting announcements on RNS – made clear that it could not force such a requirement onto its clients without pressure from them.

The problem is that those clients – the issuers – have no reason (yet) to change their way of operating. There is no clear business case or driver for such a change. The exchange, while it believes it would be a good thing for issuers to send announcements to RNS in a standard format, it also believes the only way this will happen is if there is regulatory pressure to do so. Perhaps the upcoming Transparency Directive might help?

Even if there were progress here, this would only address London Stock Exchange-listed securities. What about the rest of Europe? What about the rest of the world? One thing is clear, without full engagement of all industry participants (including issuers in the corporate actions space), progress will be slow. As Tony Kirby, also at the event, pointed out, “Corporate actions is not a quick-win space.” And as we’ve seen before, it is only when real external drivers – ie: regulations with stiff penalties for non-compliance – are introduced that action is taken.

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