SunGard is exploring opportunities to apply its managed data service capabilities to the requirements for storing pre and post-trade data under MiFID. The vendor is at the business planning stage and is consulting with customers to establish their appetite for such services. As well as offering discrete data services, SunGard intends to team its data offerings with the Front Arena order management system for use by institutions planning to be systematic internalisers under MiFID.
The vendor can also offer consultancy to institutions grappling with the still unclear details of MiFID implementation country by country. According to Paul Harrison, vice president, enterprise data management at SunGard, uncertainties remain in a number of data-related areas, including data formats, separators (whether to use a full stop or a comma to mark decimal points, for example) and the number of fields required to report post-trade data (the German regulator is specifying more than 50 fields, whereas the FSA requires just 23). In addition, though there is requirement to publish post-trade pricing data, it is not clear whether putting it on a website will be enough, or whether the venue will have to be a recognised exchange or main market data feed.
According to Harrison, the outsourcing option is ideal for pre and post-trade data storage under MiFID because the activity brings no competitive edge to institutions. “This is commoditised data, therefore it makes sense to do it as cheaply as possible, and outsourcing it to managed data service providers like SunGard is the cheapest way to do it.”
SunGard will leverage its existing managed data service capabilities. The requirement is not just for data archiving – the data cannot be simply put on a disk and stored in a back room – because the execution of trades can be challenged by clients or regulators at any point. SunGard currently provides a central data integrity helpdesk as part of its managed data offering, and will develop a navigation tool that caters more specifically for MiFID requirements, enabling searches by trade rather than by specific identifiers as is possible today.
Though it is believed that most challenges will take place in the first few months after the trade has occurred, the data will need to be stored for at least five years, which creates a requirement for management of corporate actions. “Otherwise, it could be difficult to locate trades because the Cusip or ISIN may have changed because of a corporate action,” Harrison says. SunGard has the capability within its Fame offering to apply corporate actions on the pricing side, and handle the reference data needed to hook into the relevant trade.
SunGard can also already accommodate the need for segregation both between clients and within the data of single clients, Harrison adds. “We have the ability within our software to assign different business and cleansing rules to base data, and we have the necessary entitlement software in place.”
The market’s appetite to use managed services for MiFID compliance data is not yet clear to SunGard. One issue is that the data publishing requirement will mostly apply to systematic internalisers, which are likely to be tier one institutions with a propensity to build their own capabilities. SunGard will target tier two institutions and firms in the alternative investments space with the combined Front Arena/data outsourcing offering, to offer a fuller service, as well as providing the separate data services for those institutions that have already invested heavily in other order management systems and are likely to repurpose them to handle the requirements of systematic internalisation.
While the benefit of MiFID compliance will bolster the ROI on a data management outsourcing decision, it may not be enough on its own to convince institutions that data outsourcing is the right option for them, Harrison believes. “MiFID impacts so much more than just the data side of things.” That said, the continuing lack of clarity around the detail of MiFID, and the inconsistent interpretation of its elements country by country, could create an opportunity for companies like SunGard to work on a consultative basis with institutions and then apply managed data capabilities to meet their needs on a case by case basis. “The EU has created a situation where global clients will have to work with vendors in a consultative approach. SunGard would like to work with BaFIN and with the FSA et cetera to interpret their requirements. The client can then decide where to base its data storage, and SunGard can implement according to given regulators’ interpretations,” he says.