Tine Thoresen: Get On with Reference Data Standards

When I was growing up, my father taught me an important life lesson—adding value does not mean identifying a problem; it means coming up with solutions for solving that problem. But this common advice does not seem to be something we follow in the reference data industry.

The big reference data problem is the lack of standards. Data practitioners have identified that, and the regulators have identified that. Yet, few have offered quick and viable solutions to address the problem, and the slow progress seems to trouble regulators.

At the public hearing on Europe’s Markets in Financial Instruments Directive (MiFID) in Brussels in September, Sharon Bowles, who chairs the Economic and Monetary Affairs Committee in the European Parliament, said regulators need to be able to look at the same data, and the standards problem has to be addressed. “The skill and knowledge for such a project is in the industry, and I would say it is in their interests to get on with it before a not-for-profit solution is imposed,” she said.

The problem is that although there is “skill and knowledge” in the industry, it does not appear to translate into action. There is a lot of talk about how the industry needs to agree on standards, as improved standardization is seen to be vital to improve data management processes and mitigate risk. In fact, this is an ongoing theme at industry events. But there are few new ideas for how to ensure standards become a reality.

Part of the problem is time. Following the financial crisis, many of the industry experts face having to deal with limited resources and more work.

There may be little time left to dedicate to standards work, particularly since most of this work has traditionally been done in working groups, and it can take time to ensure everyone’s needs are being met.

The question is, is it really necessary to involve everyone in this standards-setting process? Can it be done with fewer people involved? It has been suggested that perhaps only five large firms could come together and agree on standards. If these five firms were to adopt the standards, this could be a good starting point, as others are more likely to follow suit when they see the larger organizations investing in adopting a specific standard.

Still, if the industry fails to ensure there is some sort of agreement on standards, the other option is to urge regulators to mandate standards. This may well be what happens, considering the fact that they seem to be running out of patience.

But the main message from regulators has so far been that they realize the expertise is in the industry, and that standards-setting should be done in collaboration with the industry. In addition, many have complained about other regulatory-driven standards initiatives in the past. Most recently, some have raised concerns about the introduction of a new identifier for corporate actions in the US as part of cost-basis reporting regulation. When regulators suggest mandating standards, market practitioners often comment on ways the standards could have been more valuable to the industry. So, is it beneficial for the industry that regulators set the agenda in the standards debate, or do the experts want to be driving the debate?

It may be difficult to say which experts should be responsible for solving this problem, but someone needs to step up and get on with it. We have identified the problem.

Now we need to identify the problem-solvers.