Data standards will simplify compliance

Data standards will simplify compliance

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Data standardisation in financial services remains far behind the retail industry and need to improve if firms are to have a better chance at complying with new regulation, says GoldenSource.

CEO John H Eley predicts that the increasingly pressing technological issues of data standardisation and data management will be a hot topics at Sibos.

“We’ve been looking at examples of standardisation from the retail industry, such as barcoding, which help firms achieve inter-company cooperation and efficiencies along the supply chain,” said Eley.

“Another example is the Electronic Data Interchange, which applies a standard format of communication between parties. This clarity of communication is yet to be achieved in financial services.”

Standards such as Financial Industry Business Ontology (Fibo), an industry initiative to define financial industry terms, definitions and synonyms using semantic web principles and Swift are leading the charge to address communication challenges.

The main issue is that standards vary across different countries, different parts of a transaction process or different types of financial instruments.

“This becomes a clear problem when looking at specifics such as transaction reporting under European Market Infrastructure Regulation (Emir), where both counterparties are reporting the same trade,” said Eley.

“If both companies are using different formats, reconciliation becomes all the more difficult and prone to errors.”

Eley pointed to a report published in May 2014 which found that European repositories warned that up to 60% of derivatives trade reports entering their systems could not be matched across both counterparties.

“The result is in an incomplete picture of activity across the derivatives markets. Getting this piece right… will pave for the way for initiatives such as T+2. Having an open and uniform approach will significantly increase firms’ chances of complying.”

Data management and, particularly, maximising gains from data collected for compliance will also be big topics at Sibos, according to Eley.

“To be used most effectively, data must be standardised, cleansed, and aggregated correctly. It is essential to establish the right relationships between important data sets. Effectively preparing critical data in this way puts firms at a competitive advantage and facilitates regulatory compliance.”

As a result of growing attention to the area, Eley predicts the rise in prominence of the “data scientist”. He envisages a data scientist’s role being to find value from existing data sets and to simplify compliance.
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