Speeding up the Standards Process

It can easily take the same amount of time to create a standard and bring a new medicine to market. It takes around ten years, the experts typically say. The problem now is that most of us can appreciate that it takes years to develop a cancer medicine, get the product through clinical trials, and bring it to the market. The argument for why it can take ten years to put together an alpha-numeric code to identify an instrument or an entity, or simply agree on a format to publish data in, is a tad less convincing.

The global nature of financial markets was highlighted during the financial crisis, and it has led to a growing realization that there is a need for standardized, international data that can easily be analyzed. The challenge now is for regulators and the industry to agree on how to do this. At recent industry events, market practitioners have suggested we have to stop talking about the standards problem, and instead come together to actually agree on standards that can be adopted. It has been suggested that perhaps around five large firms can team-up, agree on the best way forward, and become the early adopters.

There might not be much time to discuss if this is the best approach, or if someone has any better ideas. The regulators seem to be running out of patience. At the public hearing on the Markets in Financial Instruments Directive in Brussels in September, Sharon Bowles, who chairs the Economic and Monetary Affairs Committee in the European Parliament, talked about the data problem, saying: "We really must have coordination and some regulatory intervention seems inevitable to push firmly on the outstanding barriers to make sure that it gets done in a sufficiently rapid timeframe."

But Bowles also recognized that the expertise is in the industry. This has been the message for some time now. Regulators want the industry to create the standards. The problem seems to be that the process is too slow. There are now talks about standards bodies and industry associations cooperating, and there constantly seems to be something happening. The issue is perhaps simply that standards-setting takes time.

Regulators do not have time. They want to prevent the next crisis, and waiting for a ten-year standards process may not help the political agenda. It may also be slightly difficult to comprehend that it can take as long to create a standard as it can for a biochemical company to get sometimes life-saving medicines to the ill. The question now is if market practitioners will settle with the fact that this is how it is, or if someone will now take leadership, and get this party started.

For Inside Reference Data and Inside Market Data, the party will be in Hong Kong this month, where we, together with the FISD, have our annual Asia-Pacific Financial Information Conference, including an off-site dinner and a horse-racing evening.