The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

STP and Operational Efficiency are Main Drivers for Investment in Reference Data, Say RDR Readers

According to a poll of Reference Data Review’s readers, the main driver for investment in reference data management projects is an increase in straight through processing (STP) and operational efficiency.

The poll, which was sponsored by Syn~ from Coexis, indicates that despite the rumours of its ‘death’, STP is still very much a concern in the industry. More than half of respondents (52%) cited STP and operational efficiency as the main driver for investment in reference data management projects.

This result indicates that rather than being seen as a secondary concern, STP has risen up the priority ranks within institutions to gain the top spot within the area of reference data management.

A secondary concern for these projects appears to be risk management, at 24% of respondents, which is a surprisingly low number given the recent focus on the risk posed by inaccurate data in the back office. Société Générale’s woes as a result of “le rogue trader” Jérôme Kerviel’s actions last year, which led to USD$7.2 billion in losses, are a prime example of the risk posed by lax data management.

As a result of these losses and the heightened awareness of the threat posed by structured products due to the credit crunch and subsequent economic downturn, the areas of data security and risk management have been high on the industry agenda.

However, despite this focus on derivatives and structured products in the market at large, RDR readers did not rank these as significant drivers for investment in reference data projects. A mere 10% of respondents, representing the lowest ranked category, cited these products as main drivers for investment in reference data management. Regulatory compliance fared a little better as a driver for investment, at 14% of respondents.

This is also surprising in light of A-Team’s recent research into the area of derivatives and data management, which was released last month. A-Team Group and EDM vendor GoldenSource released the report on the specific challenges faced by global reference data managers in buy side firms, with a particular focus on the impact of OTC derivatives, following discussions with 100 asset management firms.

The report identified the three main forces driving a re-evaluation of data management as business risk, centralised data management and OTC derivatives, with not a mention of STP. Instead it indicated that uncertainty around how to manage the business-driven take-up of complex instruments was causing havoc with existing data management solutions, particularly older in-house systems.

Perhaps automation is seen by our readers as the key to tackling these issues – namely dealing with complex products, coping with regulatory change and getting a better handle on risk? STP is therefore seen as the enabler to tackle challenges that arise from the market and is a driver for investment in itself due to the benefits it brings to an organisation.

Given that during a time of economic difficulty, financial institutions are still investing in reference data management solutions, these drivers must make up a compelling argument for change. Long live STP.

Related content

WEBINAR

Upcoming Webinar: Evolution of data management for the buy-side 2021

Date: 27 May 2021 Time: 10:00am ET / 3:00pm London / 4:00pm CET Duration: 50 minutes The buy-side faced a barrage of regulation in 2020 and is now under pressure to make post-Brexit adjustments and complete LIBOR transition by the end of 2021. To ensure compliance and ease the burden of in-house data management, many...

BLOG

GLEIF CEO Stephan Wolf Outlines LEI Strategy Based on Hindsight and Innovation

The Global LEI Foundation (GLEIF) has set strategy that will make the Legal Entity Identifier not only essential to smooth running of capital markets, but also the wider digital economy. Achieving these goals is a matter of hindsight and innovation based on the GLEIF’s decision to drive extended use of the LEI in the private...

EVENT

Data Management Summit Virtual

The Data Management Summit Virtual will bring together the global data management community to share lessons learned, best practice guidance and latest innovations to emerge from the recent crisis. Join us online to hear from leading data practitioners and innovators from the UK, US and Europe who will share insights into how they are pushing the boundaries with data to deliver value with flexible but resilient data driven strategies.

GUIDE

Regulatory Data Handbook 2014

Welcome to the inaugural edition of the A-Team Regulatory Data Handbook. We trust you’ll find this guide a useful addition to the resources at your disposal as you navigate the maze of emerging regulations that are making ever more strenuous reporting demands on financial institutions everywhere. In putting the Handbook together, our rationale has been...