Michael Shashoua: Why Quality Should Be Job One

Last month, surveying the outlook for two major issues on the agenda at the Sibos conference—know-your-customer (KYC) data and adoption of the ISO 20022 messaging standard—it appeared that ISO 20022 adoption was going smoother than Sibos discussions revealed. The KYC data challenges raised before the event proved to be very real—and more.

Sibos host Swift’s need to keep pushing for adoption of the standard appeared to be fulfilled, allowing the messaging utility to focus on the work involved in adoption, which is proving more complicated than anticipated. Inconsistencies are arising among various markets’ implementation of the standards. Adoption is uneven among markets and firms. ISO 20022 take-up is raising challenges for IT, and it will be tough to meet all the requirements for its adoption with a single solution, says Win Bausch, a messaging services executive at Credit Suisse.

Meanwhile, Swift has been working to shore up its KYC Registry service, which has competition from other major service providers in the industry. Although compatibility among the various services is a concern, data executives from firms such as Barclays and Standard Chartered were critical of the KYC Registry at Sibos. They said it has data privacy and security issues, as well as problems with the length of the process to input KYC information into new systems and repositories. All of those issues will have to be solved before Swift can begin working on compatibility with other providers.

SPReD Utility sets a Standard
Although the Securities Product Reference Data (SPReD) utility is a sell-side-backed venture, some signs of its appeal for buy-side users have emerged. Its backers—JPMorgan, Morgan Stanley and Goldman Sachs—expect to reap benefits including greater efficiency and command of reference data. The question is whether those benefits would flow into the buy side by improving the accuracy of market information.

SPReD is the brainchild of Philippe Chambadal, CEO of SmartStream, the data services vendor whose Reference Data Utility service is the engine driving the utility. Chambadal envisioned applying a shared service model to functions including cross-referencing and enriching data. Once the participation of heavyweight sell-side users was in hand, the venture could proceed. 

When it comes to evaluated pricing data, providers are aiming to raise quality by comparing and contrasting multiple sources.

The argument is that since SPReD meets those firms’ demands for data quality and accurate, efficient processing, it will attract other sell-side firms of the same scale, and user firms of all sizes, including those from the buy side. 

Matrix for Evaluated Pricing
When considering due diligence and sourcing issues around evaluated pricing, quality ends up being the baseline for verifying evaluated pricing data, as Gary Pringle, associate director of operations at Smith and Williamson, a UK-based investment management and accounting firm, explained in a recent webcast hosted by Inside Reference Data. “You want the data to be verifiable, up to date, market-relevant and based on market color,” he said. “The levels of quality will be subjective in many ways. Some of those are self-determined by regulations or particular agreements with clients, depending on the type of investment vehicle or the portfolio in question. You need a matrix approach where the quality is more defined by the type of instrument and what you’re using it for.”

Data quality is complicated. SPReD aims to guarantee it by bringing together firms already holding their data to a certain standard internally. When it comes to evaluated pricing data, whose name implies a certain value being added to raw data, providers are aiming to raise quality by comparing and contrasting multiple sources—the matrix approach Pringle described.

As with Swift’s KYC Registry issues, quality is the foundation that must be solidified before anything else can be done—before evaluated pricing data can be leveraged, before KYC Registry data can itself be matrixed with other sources, and before a utility like SPReD can truly take off.