IBOR I/O

An interesting wrinkle that emerged during Waters' recent breakfast discussion of the Investment Book of Record (IBOR) method of data management that appears to be taking hold in the industry, was whether firms should place responsibility for IBOR implementation in the front, middle or back office.

With IBOR's reference data nature, one would think it most likely would be a back-office responsibility. One might also guess that given the nature of front-office IT resources, or lack thereof, that IBOR might be a tall order for front offices. As Sylvain Pendaries, vice-president of front office and analytics at the Public Sector Pension Investment Board (PSP), a $76 billion Canadian fund, who recently remade IBOR at the fund, told attendees, PSP only has two developers on its front-office team. Most of the front-office is analysts, quants and portfolio managers.

As a result, for PSP and similarly structured front offices, they must either draw on IT resources elsewhere in their firm, or outsource. Pendaries believes that the prerequisite for deciding whether to buy or build for an IBOR is clarity about roles and responsibilities in the firm throughout the trade life cycle. "Once you know you have no liabilities, then you can look for outsourcing solutions," he said. "But don't do that unless you know the vulnerabilities in your organization."

A firm's front office may already be satisfied with the systems it has, as Eagle Investment Systems' Mal Cullen pointed out. An IBOR project can require implementation of multiple systems in succession, or leveraging of systems investments over time. As Bob Leaper of DST said, such projects stand a better chance of gaining traction if they are divided into shorter-term phases of three to six months each, with concrete results shown after each stage.

Another inherent challenge with an IBOR is the need for data warehousing to accommodate the large amounts of data necessary to maintain such a resource. The real-time nature of front-office needs means systems must be capable of delivering intra-day updates to and from the IBOR, keeping up with transactions that are happening.

Practically, IBOR is going to have to be operated and managed by the back office. That part of a firm is best suited to run IBOR because it has more time and expertise. That does not absolve front offices of responsibility, however. They must be sure they have a handle on IBOR output and work with their back-office colleagues to keep IBOR input and output flowing.