Mind The Transparency Gap

In our reporting for this month’s issue, the theme of transparency has emerged in a couple different ways. First, investment firms are becoming more intent on gaining transparency into the sources of their pricing data, as reported in Transparent Demands. While the pressure to gain this knowledge and this command of information may be regulation-driven, firms as disparate as JP Morgan and Invesco describe proactive efforts to obtain pricing data transparency, including on-site visits to pricing vendors. So it appears pricing data providers will have to take note of this demand from their clients, not just from regulators.

This development concerning transparency appears to be positive, forward progress. That’s somewhat less so for another issue involving transparency, and that’s the deliberations and preparations for implementing a global legal entity identifier (LEI). In an online column, Forthrightness is Such a Bother, just before this one, it was noted that the deadlines announced recently by the Financial Stability Board (FSB) for this month, could be abrupt. Moreover, the latter one, the September 22 date for proposals for an operational system for the LEI in advance of presentation at an October meeting of the FSB, came with a caveat that submissions would not carry weight in the FSB’s decision process. This seems like the opposite of a transparent process.

A notable response to this argument comes from the Private Sector Preparatory Group (PSPG), which was organized by the FSB but is a vehicle for industry stakeholders to be heard by the board concerning LEI plans. The PSPG poses that its own existence means the process is not completely opaque. The PSPG’s first meeting in late July did lead to the release of news that the FSB itself either never intended, or failed to communicate that it doesn’t expect the LEI to be implemented in March, just the committees to oversee the LEI both centrally and locally. Perhaps the PSPG is holding the FSB’s feet to the fire to be more transparent about what it intends.

That aside, LEI implementation issues, other regulatory compliance challenges such as Fatca, Solvency II, MiFID 2 and Target2-Securities (T2S), and the aforementioned pricing data transparency concerns are all part of the agenda for discussion at the European Financial Information Summit (EFIS) co-sponsored by Inside Reference Data and Inside Market Data in London on September 18.

EFIS’s focus on regulations and standards that were proposed and pursued with transparency in mind, as well as on transparency of data sources, is a signal that transparency overall is an important concept and goal for the data side of financial industry operations. I’ll be present at EFIS and look forward to hearing your thoughts there.