Four Horsemen of Reference Data
Legal entity identifiers are being joined by bi-temporal data, Fatca and Target-2 Securities as major issues for firms to address this year and in coming years
Certain reference data stories loom larger than others—namely, legal entity identifiers (LEI) have been a big part of Inside Reference Data's coverage since I began as editor. As this year starts flying by, however, numerous other issues are joining LEI in the spotlight, namely bi-temporal data, Fatca tax regulation in relation to messaging standards and corporate actions, and Target-2 Securities (T2S). What these themes have in common is that technology advances are making greater sophistication in data possible.
Bi-temporal data, now supported by the ISO Standard SQL, ensures less compliance problems, because it allows firms to more easily locate what information they had about a security when they transacted that security, and thus show they made the best-informed decision possible at that time, acting ethically and providing best execution.
The Foreign Account Tax Compliance Act (Fatca) regulation's effects will soon be felt by the industry. Firms may even end up having systems in place to comply with it before they are completely prepared to handle all LEIs. Just as with bi-temporal data, however, improvements in standards (in this case XBRL and ISO 20022) are bound to benefit users in processing corporate actions. As Deborah Culhane of Fidelity ActionsXchange says, corporate actions have always faced complexity created by tax records issues. A standards advance is addressing that challenge.
Implementing T2S, the pan-European platform for securities settlement expected to go live in 2015, will require a great deal of technology work to build the platform. As this effort is further off on the horizon, the technological development is not as far along, but it will also need to include ISO 20022 format messages specialized to function on T2S, as well as harmonization of post-trade processes throughout Europe. In addition, T2S is going to affect the business models of central securities depositories and banks, which undoubtedly will require more systems and technology changes.
In coming months, it's now evident there will be several major regulatory and standards initiatives that collectively could re-shape and transform the way data is handled and managed in the securities industry. Aside from just identifiers, messaging, tax reporting and trade settlement are now all on the hook. Back offices are likely to be still busier in response, and Inside Reference Data will be too.
More on Regulation
Waters Wavelength
Wavelength Podcast Episode 165: Roman Ginis on Trade Execution
The founder and CEO of Imperative Execution looks at how trade execution is changing and what that means for the buy side.
Subscribe to Weekly Wrap emails