Michael Shashoua: Central Potential

If coupled with more direct data sourcing and implementation of standards efforts, the centralization that has taken hold in data management could yield benefits beyond what that trend has done on its own. The greater use of centralization has become evident in the increased popularity of the investment book of record (IBOR) to get a more accurate view of portfolio positions. IBOR provides access to positions in real time, and consolidates implied orders, executed orders, and confirmed trades, producing “one version of the truth,” says SimCorp’s John Mayr. An IBOR can also aggregate data from multiple sources and track independently created positions.

Recent developments also include centralization work. The Depository Trust and Clearing Corp. (DTCC) began working with global banks to combine legal entity hierarchy, know-your-customer (KYC), and other compliance-related data. The DTCC has also partnered with Omgeo on a project to centralize standing settlement instructions for all products and regions into Omgeo’s Alert database. And, in the legal entity data field, senior data executives have been pushing for a consolidated file of the pre-legal entity identifiers (LEIs) already in use.

Starting at the Source
Centralizing data is all well and good, but central and complete databases that do not conform to current standards and aren’t easy to update, are about as useful as an offline Palm Pilot in the age of the iPhone and Android. Another growing drumbeat in the industry could, if brought to fruition, ensure that the flow of data into a centralized database would be more accurate. That is the idea of generating identifiers closer to the issuing source of a security. One London data operations executive from a global firm suggests exactly this, adding that could best be achieved in collaboration with Swift.

Also, during the European Financial Information Summit in September, University of Dundee analytics professor Mark Whitehorn said that the value of big data is derived from its support for more targeted and complex queries that can yield greater insights from greater amounts of data. Coupling more accurate, closer-to-the-source reference data with more comprehensive search capabilities, and embedding that pairing into the core of a newly centralized database, would advance the usefulness of reference data for the industry.

Setting Guidelines
These advances won’t happen without plans, rules or guidelines. Industry groups are active on this front. The EDM Council and Object Management Group (OMG) have been developing the Financial Industry Business Ontology (FIBO), a semantics standards initiative. State Street’s David Saul, a prime mover in the FIBO effort, says many parties in the industry have a stake in FIBO’s success, thus encouraging the collaboration that has produced this standard for communicating information about entities and relationships. Data management professionals can now write FIBO-based programs that indicate items that are equivalent, reducing the need to translate data.

The capabilities and methods that could be embedded in data centralization represent a great deal of untapped potential.

Data semantics standards may have a positive effect independent of centralization, but that benefit could grow exponentially if they are used as the standards for data being obtained right from the issuing source and then fed into a central database; embedded into the operating systems to help support IBOR calculations; or used to govern legal entity, standing settlement instructions, or other types of reference data being centralized.

Tying together trends in data management methods may just be theoretical right now, for the most part. Yet for data management professionals concerned about accuracy in their systems and leveraging their domain to better serve their colleagues in other units of an investment firm, the capabilities and methods that could be embedded in data centralization represent a great deal of untapped potential.