Opening Cross: When You Look East, Look Up and Look Out

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Regulation dominated the agenda at last week's Asia-Pacific Financial Information Conference. But is the region ready for the data management implications of new global and regional requirements?

“Remember: Stop and look up,” I tell visitors to New York—because while it’s easy to become swept up in the hustle and bustle at ground level, skyward is where you’ll spot some of the most interesting architectural and historical sights. Yet I still haven’t learned my own lesson when visiting parts of Asia, where the instruction to look up isn’t just for nostalgia, but because that’s where much of the action takes place—from the elevated walkways that lead pedestrians from building to building without having to cross traffic, to restaurants tucked away and all but invisible to those on the ground.

The lesson is the same in the industry: Look up, and you won’t be taken by surprise when seeking new ways to analyze data to identify alpha in highly competitive marketplaces, or just trying to avoid being blindsided by new regulations, which took up a significant proportion of discussions at the Asia-Pacific Financial Information Conference last week, making it no surprise that spend on risk-related data and tools is dominating market-wide data revenues, according to Douglas Taylor of Burton-Taylor International Consulting, who presented a keynote at the event.

But according to Taylor’s research, Asia is the one region where real-time equities data dominates spend, and where equities sales and trading business remains the main source of revenues (compared to investment management in the rest of the world). Given this dichotomy, it’s no surprise that firms in Asia seem particularly concerned with meeting deadlines for global initiatives such as the Legal Entity Identifier, FATCA and Solvency II, and regional laws such as Japan’s amended short-sale rules—which caught out a few firms last week—or new laws governing electronic trading in Hong Kong described at the event by Nick Ronalds of the Asia Securities and Financial Markets Association.

ASIFMA’s solution to managing the new requirements that might otherwise have overwhelmed the association and its members was to force all participants to collaborate on a definitive guideline document (at least, as definitive as possible, given that the regulator won’t endorse it, Rolands said)—soon to become an online, auditable declaration and certification system for demonstrating compliance—that would avoid the potential confusion of each firm creating and acting on their own interpretation of the rules.

ASIFMA’s approach isn’t unique, with others extolling the benefits of collaboration: “When we collaborate, we can do something once and everyone benefits from shared knowledge… to deal with the regulations being forced on us,” said Nick Taplin, senior pre-sales executive for data management services at SmartStream.

Why is this the job of market and reference data professionals? Because ultimately, many of these challenges are data problems at their core: Counterparty issues are about how much data you have about who you do business with, while solvency and capital adequacy issues trace back to how well you manage your holdings and liquidity data. And even firms with well-organized data management processes find this to be akin to a journey of self-discovery as they learn what data they have, and where it is kept.

These measures will stand the industry in good stead in the event of more regional regulation. But with some Asian economies no longer growing as fast as they did during the global economic crisis, “some Asian countries have to make a choice—there is a large tradeoff between regulation and economic growth,” said David Lecompte, senior strategic business development manager at SIX Financial Information.

Of course, market participants don’t have the luxury of picking and choosing the regulations they comply with. But they do get to choose how they achieve compliance—they can do it alone and look out just for themselves, or as part of a movement that looks up to a loftier ambition: to get it right for everyone, with collaborative models and even shared utilities to ensure that regulation governs—but doesn’t disrupt—the markets.

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