Ref Data Industry Gears up for OFR Director Selection Process

Following President Obama signing the Dodd-Frank Wall Street Reform bill on July 21, market participants have started debating who should fill the position as head of the data collection, analysis and research centre, the Office of Financial Research (OFR), which will be established within the US Department of the Treasury.

The OFR, a new organization firms in the US will have to send data to, will be headed by a director appointed by the President with advice and consent from the Senate.

Industry groups are now focused on providing decision-makers with recommendations for candidates. New York-based Allan Grody, president of Financial Intergroup Advisers, says he is participating in an industry effort within the risk management community aimed at putting up some candidates for this position. “Ideally, we would like to see a practitioner in this role,” he says, adding that the hope is that the OFR will take direction from the industry.

The chosen candidate, who will serve for a six-year term, will be part of the US executive schedule, listing the highest ranking appointments in the US government. The new director will be compensated at Level III of the executive schedule, which as of January 2010 means the basic pay will be $165,300.

The director, who will also serve in an advisory capacity as a non-voting member of the Financial Stability Oversight Council, is expected to be able to influence how the OFR will work in practice as the wording in the bill does not go into detail in terms of what data items will be collected or in what format.

Princeton, New Jersey-based Ed Ventura, president, Ventura Management Associates, stresses that the first director of the OFR will have “the responsibility of translating legislation into specific rules and guidelines that will affect the financial institutions of the largest economy in the world.”

“The position must not be filled with an individual who perceives the role as that of contributing to an academic experiment; the seriousness of the implications of using the OFR as a proving ground are too great,” says Ventura, who thinks the role requires a dedicated leader who can focus on the objectives of the OFR while balancing the political and economic ramifications of the decisions that need to be made.

The main question is what type of background the best person for this job will have. Washington, DC-based Mike Atkin, managing director of the EDM Council, says the first director has to know the industry, as this is where the OFR will find the right talent. “They will pull the list of potential candidates from the financial services industry and from academia,” he says, adding that this is a critical role that has to be filled by someone with credibility who understands data and analytics.

The legislation specifies that the director, who will deliver an annual report to Congress, can speak freely. Pennsylvania-based Arthur Small, principal at consultancy firm Venti Risk Management, and co-founding member of the National Institute of Finance, which was involved in presenting the OFR concept to the legislators, says: “We thought a lot about how to shield this Office from political interference.”

For Small, it is important that the director is not seen to speak on behalf of a political agenda, but can report on what the data says. “It must be someone who has knowledge about the financial system,” he says.

The expectation is that the director position will be filled by someone with financial industry experience and a mix of skills—knowledge about financial economics and financial information technology. In addition, the first director will need experience in building a financial and computing operation, says Small

New York-based Norman Brower, executive director, reference data solutions, Morgan Stanley, says the director needs to have a fundamental understanding of financial products. “Knowledge of the industry and how it works should be a requirement,” he says, adding that data normalization will also be a big part of the job, and the candidate needs to be someone with an appreciation of dealing with uncorrelated data sets.

It has been suggested someone with a political or academic background may also fit this job description. New York-based John Mulholland, director, global head, reference data, capital markets and securities operations at RBC Capital Markets, says he does not expect to see the position filled by someone from the financial services industry. “I think the person will be from academia—someone who is familiar with systemic risk,” he says.
Tine Thoresen