Dealing With Data Dichotomies

Looking at the issues of pricing, data governance and identifiers covered in-depth in this month's issue of Inside Reference Data, one finds a common thread of a dichotomy between what is mandated by regulation and what can be achieved practically through justifiable business means.

New rules governing pricing in the form of the Alternative Investment Fund Managers Directive (AIFMD) and International Financial Reporting Standard 13 (IFRS 13), set up policies and procedures aimed at making valuation more transparent and ensuring consistency among international accounting standards.

For AIFMD compliance, fund managers must do more thorough due diligence on pricing vendors, HSBC's Anthony O'Connor says in "Towards Transparent Pricing". That, in turn, means pricing vendors must provide more detail about how their calculations are done. Similarly, for IFRS 13, it is evident that entities must understand the inputs used for valuations. But while the architects of the new rules have set out certain principles, what can be done in reality by the pricing providers may or may not measure up to them.

Knowing the origins for pricing data in these instances seems similar to how data managers are learning to work with the legal entity identifier. The industry is managing to put some intellectual property concerns aside to make the LEI work cost-effectively, as Thomson Reuters' Tim Lind noted in the webcast covered in this feature.

When it comes to the LEI, data managers are also contending with a federated structure of local operating units that could cause some to chafe-at least if the central operating unit or porting facilities such as the one developed by the European Central Bank prove insufficient to ensure compatibility among different jurisdictions' versions of the identifier.

Data governance struggles can also occur between operational units within a single firm. In a look at data governance among asset management firms in a single market─the UK─at a Rimes Technologies-sponsored conference covered in "Ungovernable Data?", we hear how IT and operations staff take control of data but do not allow or require business-side colleagues to weigh in on how data is managed and governed.

This is an important gap. Just as the LEI system is requiring data managers to navigate the aforementioned federated patchwork of local administrators, the gap between IT and the business units means stitching together data placed in multiple silos. Regulations, including AIFMD, could push the IT and business units to "play nice" and work together on true, consistent enterprise-wide data governance. But the business case must be made, as one fund manager said in this report.

Friction between the operations and business sides of any endeavor is certainly nothing new, but figuring out a way to solve that age-old problem for data managers, whether they are concerned with identifiers or pricing, would be a new achievement.