Saturday, June 27, 2009

Who's Got the Entity Data Standard?

It's been an interesting month with many articles and editorials in publications such as Reference Data Review, Inside Reference Data, Global Investment Technology and Securities Industry News to name a few all raising the issue of standards in the business entity data space. There is no shortage of contenders. SIIA is pushing IGI (Issuer, Guarantor ID). SWIFT is considering a role by expanding BIC coverage and addressing the non-uniqueness of the BIC. Factset has made past announcements of their intention to make a public standard available. Other major data vendors such as Bloomberg, ThomsonReuters and D&B already have broad coverage. The European Central Bank is working on a data utility. So is Financial Intergroup's Allan Grody. And so is the Dubai International Financial Centre (DIFC). Avox has an initiative S&P called the CABRE (Cusip, Avox Business Reference Entity). We've also recently launched a free business entity directory ( And of course there are the industry working groups including the EDM Council, JWG-IT and FISD all talking about standards.

This is all looking pretty positive, isn't it??? (NOT!!!).

Let's be honest here. Every commercial firm in this space would love to own the global standard for business entity identification. Think about it. The entire planet "theoretically" would have to pay you and only you for the right to get an authoritative picture of a business entity. Just think of the monopoly play here. Millions of customers needing millions of pieces of information every day. One year's profit would pay off the US national debt.

At least that's what many buyers of such information believe. It's not quite that profitable a picture. Here's why.

There can never be a monopoly provider of this data. The function that all of the above mentioned firms play is that of data aggregator. Some firms use automated matching to provide a consolidated picture, some use manual analysis and all the others a combination of both. The sources we go to are the same that anybody can go to directly.

The sources used typically include national and state business registries, regulatory authorities and tax authorities. All these organizations have an obligation to make information available to the public (although some of them have decided to put a rather hefty price tag on some important data). Some data is not publicly available and various vendors have secured rights to it but by an large, nobody had universal access to everything (the Google guys are trying...).

So where is all this spaghetti going to get us? In my opinion, it's going to get us to where you want to go. Competitive forces are pushing all vendors to be more innovative, cost effective and customer focused. A perfect world in the Avox view is one where everyone works off of the same underlying basic content that uniquely identifies a business entity. The ID becomes a secondary issue but remains important of course.

Some vendors are working to this objective. You won't be shocked to hear that Avox is one of them however a number of firms we have spoken to are also "chilling out" with respect to relinquishing value of the basic data.

Please believe me when I say that Avox does not expect to be able to solve the whole problem on our own when it comes to business entity identification. We can't. But we can help facilitate a quicker convergence onto a standard by being open and "influencing" other firms to be open.

If you buy into this view, let your vendor partners know. The sooner we connect, the sooner you can connect and that's when everyone can get on with the business of efficiently generating returns for customers.

Your Data Geek,


Saturday, June 6, 2009

KYC - Global Regulatory Conflict

On June 4, GoldTier, a KYC software company hosted a speaker panel to discuss the impact of a changing global political and economic environment on the Know Your Customer (KYC) function at financial institutions. One of the discussion points exposed a great deal of frustration amongst the participants which included representatives from North American and European financial institutions.

As a KYC professional at a global financial institution, it is incumbent upon you to ensure that the head office of your firm is aware of their global exposure to any and all customers. This requires transmission of what some consider to be "sensitive" data across international borders. Countries including Singapore, Switzerland and Korea are asserted to have in place data privacy regulations that prevent such data from being sent across their borders. By definition, this would make it legally impossible for firms located outside of those countries to do business there.

This is clearly not the business reality. The problem as I see it is that compliance officers are paid to be ultra conservative and risk averse. This results in overly conservative interpretations of international regulations governing, amongst other things, data protection. This puts them and their firms in an awkward position of having to rely on the opinion of their locally based compliance function to make judgements without having the ability to regularly audit the process and data from a foreign head office. So ironically the risk averse compliance function is introducing a significant risk to their firm by not sending what is typically generic company information between geographies.

We have international clients who have realized this and have engaged with regulators in countries like Singapore to get clarity. Indeed Avox has been involved in some of these discussions directly. In most cases, there is actually no restriction on sending company information outside of these countries. How on earth would firms in these countries do business internationally if this was the case?

It's time for the business to work closely with compliance and have frank discussions with any regulatory body they believe is hampering transparency. Any country that truly prohibits communication of important decision support information outside of their borders needs to be prepared to suffer a drastic reduction in international trade. I think you will find that the reality is most regulators will not stand in the way of legitimate commerce.


Tuesday, June 2, 2009

Canada ready to take a reference data lead?

I've just returned from the third of three EDM Council meetings chaired by Mike Atkin, this one in Toronto. The previous recent meetings were held in Boston and London. I was pretty suprised at the contrast.

The Toronto event was well attended by most of the major banks, funds and a number of vendors. John Mulholland of RBC kindly hosted and injected much relevant and interesting comment. A representative from the cash equities business group at CIBC provided a significant amount of challenging, insightful and truly helpful comments. This helped make the Toronto meeting one of the most dynamic and relevant EDM Council meetings yet in my opinion.

It was rather shocking to see the Toronto financial community coming together with so much vigour. I've personally been trying to foster a reference data community here, (where embarrassingly, I'm based) but to little avail. Hats of to Mike and John for getting the ball rolling and to all the firms that participated for grabbing the bull by the horns. Maybe it's time for Canada to start leading the reference data charge...