Pursuing Collaboration and Managing Expectations

In a series of Q&As to appear over the last few weeks of 2014, Inside Reference Data is asking financial services data management industry experts what the trends are likely to be in 2015 for data management, how legal entity identifier (LEI) implementation will proceed, and how data may be gaining importance and attention at the highest leadership level in firms. Today, we hear from Chris Johnson, head of product management, market data services, HSBC Securities Services.

What new technologies will impact reference data this year?

The heavy duty new regulatory reporting requirements are likely to require flexible and comprehensive reporting systems and data warehouses in order to support the required linkages between data content, the large number of new fields, cross-regulatory consistency and the raised bar for quality and coverage. Extensible Business Reporting Language (XBRL) is the required technical language for Solvency II reporting, which will also make an impact. The EDM Council has produced some technical solutions for reference data, which some of its member firms are reviewing.

What trends or approaches do you see developing in enterprise data management?

There are many approaches to managing the expansion generated by regulatory reporting, such as tactical solutions, retro-fitting existing systems, new green-field site reporting systems, managed services, new utilities or a combination of these. Firms will need to decide which data strategy works best for their business. The successful solutions will provide consistent reference data content, both within each firm and also industry-wide. Asset owners are also very much in the spotlight and are required to have governance over their held assets. This means their outsourced service providers need to provide enhanced reporting, granularity and transparency. Data management techniques will be needed to help support new demands on collateral management, stock lending and identification of beneficial owners.

What regulatory issue or requirement is looming largest for you in 2015?

It is necessary to manage the expectations of regulators who require asset data to be complete, accurate and appropriate, which is not always the case at an industry level. There is a dependence on the data supply chain to support the proliferation of new data content prescribed for regulatory reporting, and these new fields will require much attention. Firms will need to collaborate to simplify and solve this with a common approach (because the reporting data should by definition be non-competitive and identical for all firms) while being wary that new solutions don't just add more layers in an already complex area of the business. The cost impact will start to materialize in 2015, because with the exception of the legal entity identifier (LEI), none of the data content is free, and the extra data usage will need to be licensed.

Do you see significant progress towards the adoption of identifiers such as the LEI?

The growth of the LEI to date has been driven by regulatory need rather than demand. The next phase of growth will most likely be driven by the anticipated MiFID requirement for issuer LEIs. The logistics are difficult, because each individual entity must take responsibility for creating their own LEI and re-certifying annually. This will require a great deal of industry engagement to reach out to each affected entity and explain what they need to do.

How will skills and roles, such as that of the chief data officer, develop?

Chief data officer roles are already shaping up to be quite diverse. This is largely due to the differences between sell-side and buy-side, but also because firms are at different stages of maturity. It is necessary for CDOs to augment the business strategies of their firms to enable growth, enhance internal governance where needed, promote long-term streamlining through industry engagement and manage the associated costs. Some buy-side firms are appointing data governance functions with expert senior individuals who have deep knowledge of both the business and the data. This involves freeing up such resources from their business-as-usual responsibilities and is likely to be an effective approach.