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DATA SERVICES
MARKET GUIDE

EVOLVING
DATA

REGULATION - MiFID
FINANCIAL DATA - EVOLUTION
DATA SERVICES - PANEL DEBATE
TECHNOLOGY WORKFLOWS - MAXIMIZING RETURNS
ENTERPRISE DATA MANAGEMENT - ALL ABOUT THE DATA 2007
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Foreword IAM
International Asset Management
Limited (IAM) look at the
Importance of Data Management
in Hedge Fund Investing
Alan Djanogly
Head of Investments
International Asset
Management Limited
As Henry Louis Gates Jr, the prominent American
politician once said (tellingly in an advertisement for
IBM), ‘Collecting data is only the first step toward wis-
dom, but sharing data is the first step toward commu-
nity.’ This is especially true in the ever evolving and
growing domain of hedge funds. In the hedge fund
universe, the quality of information and data manage-
ment lies at the heart of the industry where investors
Importantly the more
data that is available, the
more accurate the profiling
to enable appropriate peer
comparisons at an
individual level.
are continually aiming to reassure themselves regard-
ing the quality, validity and robustness of this growing
investment class. The consequence is an emphasis on
good, consistent data management standards to satis-
fy the intelligence gathering requirements of the grow-
ing group of institutional hedge fund investors.
Performance returns are not the only type of data to
be analysed in order to shed light on the hedge funds’
business practices. Additional areas include the levels
of assets under management (new inflows and out-
flows), the levels of staff (similarly the flows are
noted) and the number, size and tenure of the client
base. All these facts are taken to add colour to the
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 1
otherwise one-dimensional picture of performance
returns.
Importantly the more data that is available, the more
accurate the profiling to enable appropriate peer com-
parisons at an individual level. When this extends
across the industry it facilitates more accurate and
valid indices, areas which have historically drawn criti-
cisms concerning the quality, longevity and other bias-
es of the underlying data series. External endorse-
ment and authentication validates the quality of the
fund and provides the investor with further reassur-
ance.
Ultimately if individual hedge funds are able to
demonstrate to potential investors that they are adopt-
ing an appropriate level of quality, rigour and trans-
parency both in their operations and in the recording
and accuracy of their data they will be improving at a
grass root level the perception of the industry as a
whole, whilst simultaneously raising the likelihood of
receiving the important institutional grade of ‘sticky’
investors.
However, it pays to remember that the data driven,
quantitative aspects of the analysis process are just
one side of the coin and must always be matched by
equally transparent and strong qualitative characteris-
tics. For no investor will make a decision based solely
on the data and as Winston Churchill once said
‘Statistics are like a drunk with a lamp post: used
more for support than illumination’.
Mr Djanogly was a founder of International Asset
Management Limited (IAM).
He has over 20 years of investment management experience
and over 19 years of experience in the hedge fund industry.
Prior to IAM, Mr Djanogly was at Drexel Burnham
Lambert, having joined from Robert Fleming Investment
Management. For the past 13 years, he has been responsible
for IAM’s investment team and has directed IT
development. Alan graduated from CLP.
 Editorial - Data Services 2007

DATA SERVICES
MARKET GUIDE
2007
Welcome to the 2007 edition of Amid regulatory change, an increasing number
of asset classes, and industry wide initiatives
ISJ’s annual Data Services Market around technological development and STP, the
Guide. The Market Guide is a data world is becoming an ever more complex
place in which to be. In this dynamic and ever
resource and directory for all data changing area of the market further evolution is
industry participants and, expected in years to come. With this in mind we
welcome you to our Data Services Market Guide
importantly, a quick reference for 2007.
handbook for fund managers, We would like to extend our thanks to
International Asset Management Limited for their
custodians and administrators on foreword, giving us an update on how the data
the changing regulatory, landscape is affecting the hedge funds industry.
In this edition Kirsti Suutari of Reuters
technology and investor Enterprise Information analyses the tension
landscapes. between achieving returns and managing
technology workflows and whether it is possible
to run high performing technical operations that
complement investment decisions, without
overspending on your IT budget.
David Hirschfeld of Asset Control looks at the
evolving world of financial data and addresses
issues around data sources, data quality and how
the volume and complexity of data has changed.
In the search for transparency, examination of
risk management procedures and investment in
new instrument types, Interactive Data’s Nat Sey
analyses the availability of data; data that does
not have to be commoditised.
Sungard’s Janet Crowley tackles Enterprise
Data Management and why the traditional
approach to data management is simply no longer
meeting the demands of the business. Richard
Newbury of Telekurs looks at the regulation
landscape and looks at how far away from the
finishing line was actually are.
Our panel debate focuses on the challenges
that face the data services world for 2007,
technological and STP innovation, and what we
can expect from the next year in data services.
We would also like to thank the MiFID Joint
Working Group (JWG) and the Reference Data
Subject Group (RDSG) for the use of their
discussion paper: The Implications for Reference
Data under the Markets in Financial Instrument
Directive.
Finally, we keep relevant to the industry at
large by receiving feedback from a range of
participants, we welcome all questions and
suggestions that you, the reader, would like to see
and any other comments.
Alan Duerden, Editor
2 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
 Contents - Section 1

2 Introduction Data Services Market Guide

Forewords
1 IAM Data Management in Hedge Fund Investing

6 All about the Data The Enterprise Data Management Suite

10 Maximising Returns Kirsti Suutari of Reuters on managing technology workflows

Special Feature
16 Discussion The Data Services Panel Debate

Section One
30 Brave New World Asset Control look at the evolving world of financial data

data
32 Regulated Lives We Lead Interactive Data get to grips with the essential role of data

34 Ask the Experts

- topical questions answered by technology companies and data providers....

Section Two
44 Introducing EDM Sungard look at the development of Enterprise Data
Management

47 The Finishing Line Telekurs looks at the regulatory landscape

50 Longview The Data Services Landscape for 2007

Data Services Guide

56 Planning for Regulation
- MiFID Overview
- MiFID: Meeting the Challenges
- Conduct of Business
- Markets & Transparency
- Cross-border Business

60 Group Effort - MiFID

- Instrument and Business Identification
- Considerations for Instrument Data
- Definitions of Terms

Appendix
70 Glossary - Terms of Use

71 Company Profiles - Market participants

4 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007

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 REVIEW / GoldenSource on EDM

When writing clean, consistent, timely and effi-

Vertically ciently managed reference data is the essential
component of every securities and asset-manage-
ment process. Any problems with the core refer-
Challenged ence data ripples throughout the enterprise,
increasing cost and risk while jeopardizing service
reputation. Regulation and competition are forcing
traditionally product-centric and product siloed
GoldenSource examine capital-market firms to adopt a centralized data
management approach.
Enterprise Data
The Data Management Challenge for the
Management. Securities Industry
Horizontal technology-driven innovation has
failed to deliver the industry-wide operational and
financial benefits that were predicted and it is
clear that technological innovation needs to go
Regulation and competition
are forcing traditionally
product-centric capital-market
firms to adopt a centralized
data management approach.
hand in hand with vertical domain expertise in
order to succeed. Recently, the concept of

6 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007


Enterprise Data Management has dominated the
debate about moving the securities industry to a
new level of efficiency and productivity. There are
clear signs this is not just another trend – and the
speed at which the securities industry continues to
Poor quality reference
data such as incomplete,
conflicting, or inaccurate data
can cause exception through
the entire transaction process.
move to a generalized adoption of an Enterprise
Data Management strategy has been remarkable.
Price of Failure
- It is estimated that inaccurate reference data
is the root cause of up to 30% of all failed
trades (on stock markets and so forth) and that
the total cost of failed trades in only a medium-
sized bank (10,000 transactions per day) can be
as much as $4.8m per year.
- According to the Financial Times, the cost of
one failed trade can be as high as $50, resulting
in total industry costs of up to $10bn annually.
- Currently some brokers-dealers maintain
more than 100 security/entity masters for
access by both buy-side and sell-side firms.
Many of these firms also operate 50 or more
legacy applications.
- Global brokers-dealers spend more than
$50mn each year to maintain reference data,
employing more than 200 business analysts
and 50 to 100 application developers dedicated
to reference data-related work. Including asset
managers, for the industry as a whole the annu-
al cost of reference-data maintenance is esti-
mated to be in the range of $2 to $3bn.
It is clear why EDM has made such inroads into
strategic agendas. Many of the competitive, regula-
tory and technology challenges have a common
denominator in the need to capture, manage and
analyze product, customer, counterparty and oper-
ational data at a very granular level, allowing simi-
lar and interconnected data sets to be grouped in
order to move to holistic risk management.
Market, credit, counterparty and operational risk
can be managed effectively only by implementing a
data-centric operations platform. The silos of infor-
mation that exist at the level of products, desks,
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 7
Data Services Market Guide
geographies and their supporting applications con-
stitute the biggest roadblocks to a strategic re-
engineering of firms’ capabilities. Pursuing an
EDM strategy is now widely recognized by practi-
tioners and analysts as the most cost-effective
approach to transforming legacy infrastructures
into a Service Oriented Architecture.
In response to these challenges and their inher-
ent data-management requirements, the EDM
Council was formed by participants from leading
institutions and with sponsorship from
BearingPoint, Cicada, GoldenSource, IBM and
SunGard. The purpose of the council is to provide
a senior management forum for peer-to-peer
exchange of information and to move enterprise-
data management from concept to implementa-
tion.
Your Data Management Challenges
Tactically, this translates into projects to provide
more accurate and consistent reference data, to
connect critical data sets to manage risk and to
improve system and operational efficiencies.
There are a number of typical challenges that a
solution such as GoldenSource EDM can address,
including the following:
- Poor quality reference data such as incom-
plete, conflicting, or inaccurate data can cause
exception through the entire transaction
process, including failed settlements,
compliance breaches, incorrect fund valua-
tions, client service issues and incorrect risk
management metrics.
GoldenSource EDM enables a validated compos-
ite golden copy to be published in real time.
- Existing data tightly coupled to single func-
tions or applications cannot be shared by mul-
tiple applications, leading to manual work-
loads and data duplication.
GoldenSource EDM enables all security, product,
customers, counterparty and positions data to be
consolidated and distributed across all consuming
applications from a single source.
- Data vendor relationships duplicated due to
data fragmentation in silos.
GoldenSource EDM enables vendor data to be
received as a single instance, validated and cross-
referenced into a golden copy record and distrib-
uted to multiple end points.


 REVIEW / GoldenSource on EDM
- Fragmentation and duplication means
existing data platform is not scalable – clients
want to create a centralized data hub to create
a single consistent way of capturing, maintain-
ing and publishing the data.
GoldenSource EDM creates a service architecture
that allows IT and people resources to be central-
ized and highly specialized, servicing a large
community of internal and external clients. This
enables a move into a new product area, the
pursuit of an acquisition strategy or the further
development of infrastructure.
- Difficult or impossible to view relationships
between products, issuers, customers and
counterparties, making risk management a
manual exercise.
With GoldenSource EDM, it is possible to drill
down from a product to the company that issues
it, the customers that hold it, the positions
held and the underlying transactions – enabling
an end-to-end view of credit, market and
operational risk.
Positions & Transactions – Market Drivers
Today’s regulatory environment requires financial
institutions to have a more corporate overview of
their overall positions and exposures. Accuracy
and timeliness impacts a firm’s exposure and cash
management as well as responding to compliance
and regulations. The variety of securities and
issuers are increasing and the number of trading,
settlement, accounting, and information systems
has multiplied to keep pace. As a result,
determining exposure to a division or a client,
counterparty, instrument or market sector for
example can be complex.
To achieve better balance sheets and liquidity
projections by trader, customer, department,
product, industry, location, region, country, etc. it
is important to have in place the systems and
processes to consolidate all current and
anticipated positions and cash in real-time, and
integrate the results with accurate market and
counterparty data.
Instead of a single view many firms have
multiple systems and applications, each one origi-
nally designed to capture the transactions and run
the associated operations of a particular aspect of
the business. Consolidating data obtained from
different departments and systems can be
complex. Each source often uses its own descrip-
tors and formats. Specifically, lack of standards
between trading partners, and limited unified or
normalized data formats hamper consolidation
8 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
efforts. These differences must be resolved before
data records from different sources can be
successfully consolidated into a single view.
Accuracy and timeliness
impacts a firm’s exposure and
cash management as well as
responding to compliance
and regulations.
A solution such as the GoldenSource EDM plat-
form delivers the information that is derived from
transactions, market data feeds, and
customer/counterparty updates that are drawn
from multiple disparate systems – continuously,
without manual intervention or batch processing.
In EDM master reference data (securities,
products, counterparties, customers) sources
work together with accounting engines to establish
a platform that aggregates positions and balances
by product, currency, legal entity, customer,
counterparty, trading desk, industry, company,
region, country, investment manager and other
criteria of interest.
Each position and balance is related to its
transactions, journal entries and customer/
counterparty data, enabling rapid research into
details of anticipated settlements and cash
movements at each settlement location and
bank, as well as segregated, pledged and
otherwise unlendable positions. Ratings, prices
and other indicative data that is sourced from
multiple market data vendors are consolidated into
a composite for each financial instrument, and
foreign exchange rates are maintained across
all currencies.
The consolidation engine then uses this data
to re-value positions, as well as to forecast cash
flows and currency exposures in both trade
currency and base equivalent currency. The
comprehensive content of the enterprise data
platform means that it is also an ideal repository
for supporting credit, regulatory, compliance,
profit and loss, and other financial control and
reporting applications. The platform provides an
unprecedented ability to summarize positions
and balances to any hierarchical level, as well as
research from any level into individual transaction
and journal entry details. At the same time
the platform is flexible, allowing users to invoke
the library of posting rules, financial calculations
and value-added functionality inherent in the
consolidation engine, to the incoming flow
of transactions. 

Telekurs (U.K.) Ltd.
15 Appold Street
London
EC2A 2NE
Telephone: +44 (0) 20 7550 5000
E-mail: info@telekurs.co.uk
www.telekurs.co.uk
GLOBAL CORPORATE
ACTIONS, PRICING,
CROSS-REFERENCE AND
DESCRIPTIVE DATA.
Telekurs Financial is a leading provider of corporate
actions, pricing, cross-reference and static information
for international securities. Between our Head Office in
Zurich and our international network of subsidiaries, we
manage one of the world’s most comprehensive, global
securities databases.
As a founding member of the Association of National
Numbering Agencies (ANNA), Telekurs Financial promotes
industry standards to facilitate the trading and adminis-
tration of securities.
With over 3 million instruments, we source data directly
from over 200 exchanges and 400 contributors. Data is
available in a variety of formats including fully encoded
data feeds optimised for automated processing, bulk file
or selection.
Whether you are active in investment consulting, asset manage-
ment, financial analysis or securities processing
and settlement, our data resources provide a unique com-
bination of quality, depth and breadth of information.
Telekurs Financial’s Corporate Actions Solutions offer:
– Comprehensive, global coverage
– Highly coded, structured and consistent data – ready for STP
– Full cross-reference information including ISIN, SEDOL,
CUSIP, VALOR and COMMON
– Flexible delivery via Valordata Feed (VDF),
TitelBulletin II (TBII) and customised corporate action reports
– Delivery in ISO15022 format (also available via SWIFTNet)
 REVIEW / Reuters on the Role of High Quality Data

Maximising
Returns
The tension between
achieving returns and
managing technology
workflows could be impacting
hedge funds’ competitive
advantage.
Kirsti Suutari of Reuters
Enterprise Information looks
at whether it is possible to
run high performing technical
operations that complement
investment decisions, without
overspending on your
IT budget.
10 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007

The ability of hedge funds to deliver market-
beating returns for their investors is dependent
on many factors. At the head of the list are trad-
ing skills, market knowledge, the willingness to
assume risk, and the ability of a trader to do all of
this just a bit better than the competition. In the
end, however, the brilliance of the market strategy
and the execution skill of the trader won’t make
any difference if the quality of the data inputs and
the execution tools aren’t up to scratch. Indeed, a
suitable analogy would be employing a master
carpenter to build one’s home whilst only allow-
ing him access to poor quality tools.
No matter what your position within the market
- whether you are a broker, fund manager, or trad-
er - when you look to create high returns the
process is largely the same: ideas are spawned
and tested; decisions are made; orders are gener-
ated, executed and settled; and records are kept
Brilliance of market strategy
and execution skill of the
trader won’t make any
difference if the quality of
the data inputs aren’t up
to scratch.
to ensure regulatory compliance, transparency,
and for performance measurement purposes.
Traditionally this process involved a highly manu-
al component, but increasingly these functions
are being migrated from people to machines and
in many cases are even being outsourced. This
migration imposes even more stringent perform-
ance burdens. Regardless of whether manual or
automated, several themes pervade the entire
process; these include: quality of information as
measured by completeness, breadth, depth, and
accuracy; latency or speed; and performance,
chiefly where automation is concerned.
Open any trade publication and expect to be
inundated by marketing messages from a parade
of data and technology suppliers advertising their
versions of the “better mousetrap” which will
simplify processes, improve performance,
increase speeds, and even butter your toast.
Chances are many of these products actually do
what is claimed on the box but rarely do they pro-
vide a comprehensive answer to all of a fund’s
workflow needs. In the end, it is up to the fund
managers to determine what pieces are required
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 11
Data Services Market Guide
and to interconnect and integrate them into the
enterprise’s operations. When the fund manag-
er’s expertise is focused on investment ideas and
not in C++ programming, this may make the
process extremely daunting.
One must ask, then, is it possible to pull together
a performing set of tools to meet workflow
requirements without enormous IT and market
data budgets?
Perhaps the issue would be best illustrated with
an example. One of the more advanced tools a
statistical arbitrage hedge fund will use is an
automated trading platform where alpha-generat-
ing investment strategies are composed, translat-
ed into a computer program, and allowed to gen-
erate trades without human intervention. This
can be very lucrative if properly done. The transla-
tion of human processes into a computerized
implementation by its nature places technology at
the core of the process: it changes the require-
ments for accuracy and speed, since a machine
cannot exercise judgment as to what is “good” or
“bad”, and a machine’s speed and capacity far
exceed that of a human being. Furthermore, it
means that the various components that are
needed to compose a system like this must act in
concert, in the same manner as do musicians in
an orchestra.
The shopping list needed to pull an automated
trading system together will include information
inputs, or the data, and the technology that uses
the data to generate the decisions, generally what
to trade, how much, where, and when, and to
how act on those decisions.
The data elements are many: fast or low latency
streaming data to monitor current markets;
cross-asset content for hedging strategies or han-
The translation of human
processes into a computer-
ized implementation places
technology at the core of
the process.
dling currency differences; extensive tick history
for research, back testing and predictive analysis;
corporate actions data for normalizing and main-
taining clean security master files; and hopefully
some leading edge inputs, such as automated or
machine readable news. The latter represents the
cutting edge for investment models since news
text has historically been interpreted only by
 REVIEW / Reuters on the Role of High Quality Data
humans. The information that news contains is
relevant to market behaviour, and is of great
value to an automated trading process if its con-
tent can be rendered readable by a computer.
The technology elements are also many: appli-
cations to build, test, optimise and run models;
other applications to warehouse the historical
data for instant retrieval; engines to analyse the
historical and current streaming data to generate
decision inputs to the models; and still others to
make sure the resultant orders are executed in
the market. As a list, it appears it would require
significant technical expertise to choose, assem-
ble, own and operate all the items. However, an
informed shopper will understand ways to reduce
potential technical overhead.
Let’s start with the data. No matter how great
the skill of a particular trader, he or she will have
a difficult time reaching their fund’s return goals
without having a complete list of data sources on
which they can access and that are broad, deep,
reliable, fast, and of very high quality. Further, it
is equally important that each of the data compo-
nents is compatible with the others, to avoid the
risk of introducing any element of complexity and
impacting performance. If one source, say, histo-
ry, is indexed by CUSIP, and another, say, stream-
ing low latency market data, is requested by
exchange symbol, then yet another system must
be devised whereby both can be requested by the
same identifier. It is much easier if both natively
understand the same naming conventions, and
observe the same field structures, so that
requesting the “bid price” retrieves the same con-
tent from each service.
From an operations standpoint, there are a few
obligations that can act to a fund’s detriment if
ignored. For example, exchanges increasingly
compete for liquidity, and in so doing, generate
regular changes to their outputs that must be
managed by streaming feed handlers. Further,
market data delivery rates are escalating at a rate
that puts heavy emphasis on capacity manage-
ment. Switching up to more or bigger computers
becomes necessary, and requires the associated
technical expertise. Ignoring these factors is done
at your performance peril. It may not however
require an entire IT department to manage.
Consider a managed service. The more fully these
intricacies can be managed by your supplier, the
less you need to be concerned with managing
them yourself.
Besides needing data to make informed trading
decisions, expected developments in the regula-
12 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
tory environment will also require a hedge fund
to access reliable data to assure transparency of
the fund’s activities and to allow for a robust
compliance function within a fund’s parent com-
pany. As much as existing components can serve
compliance requirements, for instance, audit
trail, storage, retrievability, they will also reduce
any additional investment in technology and
implementation resources.
Let’s discuss the various considerations a
hedge fund needs to address when considering
data vendors, sources, and suppliers. It in fact
does matter whether a fund emphasizes domes-
tic or international equities, fixed income, or
commodities, or a specific market. There will
always be a large cross-asset component to fund
management. This creates the need for a big-pic-
ture, holistic approach to the management of
data usage, to include oversight of markets,
sources, and data quality. Hedge funds, and
indeed, most consumers of data, rarely do any-
thing other than keep even the basics of data
management at arm’s length, neglecting to per-
form ongoing analysis to determine if the data
they are receiving matches what is required to
support the business. Data management should
be as integral a part of a fund’s workflow as the
trading system.
Of the components required to properly con-
duct a detailed analysis of enterprise-wide data
usage, it could be argued that the most neglected
is data quality. Attention to data quality will also
prove to be a valuable use of time and resources
Expected developments in
the regulatory environment
will also require a hedge
fund to access reliable data.
as it will allow the fund to focus on creating
returns. Second guessing decisions due to suspi-
cions of potentially bad data will generate costs
that will be, while difficult to measure exactly,
prohibitive and painful to absorb. This becomes
an even more critical consideration if that same
data will ultimately be used for compliance and
transparency monitoring purposes. Hedge funds
will rightly complain to a vendor or data provider
when faced with bad data as a result of wide or
single-sided markets, missing data or spikes,
timeliness and latency issues. This tends to be
driven event to event and not from an honest

look at longer-term trends.
For a fund to properly analyze its data usage, it
needs to first understand what it is doing with
the data it purchases. Amazingly, funds often pay
for data they do not use, and also fail to fully use
the data they purchase. Data is not free of
charge. Paying for only the data your fund
requires and using that data you purchase more
efficiently is a simple and quick way to cut costs
and improve the fund’s bottom line.
This is less difficult than one might imagine.
Successful and respected data providers make it
part of their ethos to act as business partners
with customers who buy their data products. For
a fund manger to truly reap the full benefit of
their data, an active, regular two-way dialogue
between the customer and the data provider is
needed. This dialogue enables the data provider
to fully understand the customer’s need and use
of data content and requisite latency, thereby
increasing the likelihood that the fund manager is
getting the data, and only the data, it needs to
achieve alpha and enterprise efficiencies. The
customer will not only gain immediate cost sav-
ings from lowering data consumption costs, but
will achieve long-term salutary effects as a result
of active data management.
Data must be reliable and meet the fund’s
needs, movements and tendencies. It should
therefore be closely monitored, and all the data
sources should, to the maximum degree possible,
work together harmoniously, working in concert
in a single application or arriving together in the
same format. Considering this in advance of mak-
ing your product choices will have an impact on
your ongoing IT requirements.
Now, let’s look at technology. Many offerings
are available in the market today, some compli-
mentary, some overlapping, some directly com-
petitive, and in varying levels of sophistication.
One may provide both data warehousing and
streaming analytics, whereas another may pro-
vide only one or the other. One modelling appli-
cation may simply generate a trade signal and
hand it off to a trade execution application,
whereas another may also translate that signal
into an order and prepare it for launch into the
market. Which one(s) you choose will depend on
your workflow requirements, and the extent to
which the applications meet your needs off the
shelf will have an effect on the in-house expertise
required to do any level of customisation. But
beware of the functionality fallacy.
Doing the right things in and of itself is not
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 13
Data Services Market Guide
enough. It is equally important to do the right
things right, meaning to do them well.
Technology is like the engine, where data is like
the fuel. Low octane fuel in a high performance
engine is the equivalent of our master carpenter
using poor tools to build your home – you will
get the outcome you expect. So technology that
works is good; technology that can work with
some of the data inputs is even better. And, tech-
nology that you know to work well with all the
data before you purchase either one is best of all,
especially where IT investment is concerned.
Data should be closely
monitored, and all the
data sources should work
together harmoniously.
Few technologies will stand alone. They must
interface with other technologies to do their jobs.
A data warehouse must be easily queried for
relevant content. An automated trading model
must have instant access to historical queries
and streaming content. But many of these
components will not easily talk to each other
off the shelf. In programming terms, one may
speak Cantonese and the other Danish. The
more applications you run, the greater the
danger of needing the entire United Nations
interpreter team.
On the other hand, some applications work
well off the shelf with some others, and with
existing data sources. It is important to have the
answers to the right questions up front. How
many APIs will you need to work with? How many
data structures will you need to accommodate?
Are there data loaders already available in your
application for the data service? Do they all have
compatible capacity and throughput or might you
expect queuing? And, do they have enough
overhead to accommodate pending data update
rates on the existing hardware? Or will you need
to invest in new boxes within a year? Ease of
integration and a simple, clean, and flexible
configuration will reduce the chance of
inter-process glitches. Good technical due
diligence and advice up front will mean savings
in implementation schedules and ongoing
operating and maintenance requirements.
So is it possible to run a high performing technical
operation without a serious in-house IT investment?
 REVIEW / Reuters on the Role of High Quality Data

Most definitely. Equally important as making

sure that each of your investments is a solid one
is how important it is that your IT investments
work together well, especially off the shelf. After
all, if you don’t need to customize it, you won’t
need to maintain it. The suppliers will, saving you
time, technical resources, and complexity.
In closing, as is often the case in life, in fund
workflows the whole is definitely greater than the
sum of the parts, no matter how good the indi-
vidual parts may be on their own. Just as one
would prepare for a long vacation, be sure to plan
out the entire ‘data and technology trip’ from
beginning to end and do not forget to adequately
prepare for the many wonderful side trips which
will make the experience that much more enjoy-
able and beneficial. While IT resources are critical
to hedge fund management, with proper plan-
ning, they should never take priority over your
investment skill.

Kirsti Suutari,
Global Business
Manager,
Algorithmic
Trading, Reuters
Kirsti Suutari has worked in the financial services
industry for 27 years with extensive experience in
trading, equity, derivatives, and market data.
Her current role within Reuters is Global Business
Manager for Reuters Algorithmic Trading. Suutari is
responsible for the development and packaging of
Reuters products for use by customers engaging in
algorithmic trading.
Prior to joining Reuters, Suutari held roles in
product management with The Financial Post
Data Group and in consultancy with Interactive
Data Corporation.

14 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007

 PANEL DEBATE Data Services
David Hirschfeld Christoph Lammersdorf
THE DATA SERVICES
PANEL DEBATE
David Hirschfeld, Senior VP of Operations,
Asset Control. During his more than 25 years in
the Financial Markets, he has had a variety of both
trading, analytical, operational and technology
jobs. These jobs have been at both buy side
(Citadel Investment and Tudor Investment) and sell
side (Morgan Stanley Dean Witter and Merrill
Lynch) institutions. He holds an undergraduate
degree in Economics from Duke University as well
as a Masters Degree in Economics from the
University of Chicago.
Christoph Lammersdorf, Managing Director,
CounterpartyLink. He joined the company in
February 2005 as Managing Director, responsi-
ble for the company’s strategy, business devel-
opment efforts and overall operations. An expe-
rienced financial data and technology executive,
he has previously served as Member of the
Executive Board of Deutsche Börse AG and
Managing Director of its Information Services
division.
16 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
Andreas Glatter Paul Kennedy
Andreas Glatter, Head Data Management
Products, Ecofin. Mr Glatter joined ECOFIN
Research and Consulting Ltd., in 1987 and has
had a number of roles including Senior consult-
ant and project leader in numerous projects for
customers in the areas of data modeling, data
management and financial instrument evalua-
tion. Prior to this Mr Glatter worked for a num-
ber of years at Credit Suisse, in Zurich.
Paul Kennedy, Vice President , Product
Management , GoldenSource Corporation.Mr
Kennedy is responsible for GoldenSource’s
Enterprise Data Management (EDM) product
suite. Prior to joining GoldenSource, he spent 7
years with Reuters where his career spans vari-
ous technology and content development roles.
Mr Kennedy began his career as a journalist
where he worked for 10 years for several news
agencies including Reuters and Knight-Ridder
Financial.

Nat Sey Pascal Mougin
Reference Data Technology: Bain or Benefit to
Evolving Systems?
Our panel explores the issues..
2006 was a busy and successful year within
Data Services, how would you describe the past
12 months and what were the most recent
developments within the market?
Nat Sey, Reference Data Business Manager,
Interactive Data (Europe). Mr Sey is a member of
ISITC Europe, the Reference Data User Group
(RDUG) and its corporate actions working group.
He is also Interactive Data's representative and co-
chair of the Market Data Provider User Group
(MDPUG) as well as one of the representatives on
the MiFID Joint Working Group.
Pascal Mougin, President and cofounder,
SmartCo. is the principal designer of
SmartPlanet. His 15 years of experience in
financial systems industry includes leadership
in infrastructure projects in the largest asset
managers in Europe, implementing positions,
risk, and performance management systems, as
consultant, product manager, and research and
development manager for major financial soft-
ware companies such as SunGard Decalog©.
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 17
Data Services Market Guide
Janet Crowley Richard Newbury
Hirschfeld - 2006 was a seminal year in the
market’s recognition of the value proposition
for buying versus building Centralized Data
Management solutions like AC Plus. Many large
buy-side and sell-side firms, like Wachovia and
Barclays Global Investors and others recognized
two key factors: 1) that these commercial products


Janet Crowley, president, SunGard’s data man-
agement solutions business. She has more than
16 years of operational, technical and data
management experience in the financial servic-
es industry. Prior to joining SunGard she held
numerous positions including chief operating
officer at Tradeline.com, and senior vice presi-
dent of product operations and director of data
services at IDD Enterprises, L.P.
Richard Newbury, Head of Product Services,
Telekurs (U.K.) Ltd. Mr. Newbury joined
Telekurs Financial's UK subsidiary as Head of
Product Services in June 2004. His primary
focus is the development of customised solu-
tions for clients. Before joining Telekurs
Financial, Mr. Newbury worked for the Financial
Times group's financial data vendor unit, FT
Interactive Data. 
 PANEL DEBATE Data Services

had matured to the point that their performance,
functionality and time to market was in many ways
superior to what they could deliver internally and
2) that the development and maintenance of these
systems was not as high a “value add” to their
internal clients as other infrastructural and appli-
cation products.
Mougin - In 2006, we also saw a rationalisation
of the data provided by the major market data
vendors; their offers are more mature and more
complete. On the client side, we saw a large
“Outsourcing projects continue but appear to be of a smaller
nature with lessons having being learnt from previous rounds.”
number of strategic “data centric” projects aris-
ing. This is a very important step. In reality,
those projects are not new, they simply did not
have enough involvement of the top-level man-
agement to rise. Now, with the help of the vari-
ous regulatory initiatives, the top-level manage-
ment clearly understand the importance of data
management. We saw also a shift in the
demand, from a wish to lower the feed budgets
to the wish to improve the data coverage and
the data quality. Our clients ask for more and
more data, and this trend will not cease soon.
For the clients that already have the choice to
easily select their data vendors (for example by
having implemented a market data manage-
ment platform), we saw them reorganising their
data feeds, ensuring that they have the right level
of quality, a fair cost, no data redundancy. We also
saw the arising of a strong demand for third par-
ties data, and the arising of few data vendors ini-
tiatives. But all this should now mature. On the
software side, some software platforms vendors
are now providing specific solutions to manage
these data. The corporate actions perimeter is still
not mature. I’ll come back on this subject later.
Lammersdorf - The past 12 months have been
significant for CounterpartyLink in that we have
evolved from a start-up to an established busi-
ness. We have also seen a growing realisation
amongst the market practitioners of the neces-
sity to start managing information processes
correctly in view of the shortening timeframe of
impending regulations. I am specifically refer-
ring to MiFID and the Third EU Money
Laundering Directive. This realisation has led
to our clients looking outside their own organi-
sations for quality data.
18 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
Sey - I believe that most players in the data serv-
ices’ space were surprised by the scale of inter-
est in dealing with some of the industry's defi-
ciencies over the past year. Implementations of
both evaluated pricing services and corporate
actions – and more broadly, reference data serv-
ices – have been of particular note. It is as
though the past few years have been time well
spent with working groups helping to define the
issues and consequently building momentum
for some of the implementations that have
taken place. What has become clear is that
there is mileage in tackling some of these
issues head on with targeted projects. The real
surprise has been that these implementations
have taken place whilst the spectre of yet more
regulatory pressure has constantly been on the
horizon.
Newbury - 2006 saw increases of interest in a
number of areas. In the regulatory arena, Reg
NMS and MiFID have become topics of interest
with firms finally beginning their planning for
these two behemoths in earnest. In the area of
financial instruments, hedge fund investment
appears to be levelling off, albeit on a high
plateau, and investment in more exotic types of
instruments seems to be rocketing. Investors
are becoming more interested in CDS, hybrids
as well as continuing to invest in hedge funds.
This leaves buy- side firms in the unenviable
position of having to value portfolios of ever
changing investments where the underlying
information is often difficult to obtain.
Outsourcing projects continue but appear to be
of a smaller nature with lessons having been
learned from previous rounds.
Crowley - From a European perspective, the
biggest single event has been the realisation by
the market (in most areas) that MiFID is real
and will happen.
Kennedy - Industry noise around the concept of
managing a firm’s critical data on an enterprise
basis has continued unabated and rightly so.
Most firms today in the securities and invest-
ment industries acknowledge that mitigating
risk and ensuring compliance for the myriad of
regulatory challenges is possible only after data

is consolidated across traditionally siloed data
structures. Increases in funding for data man-
agement projects throughout 2006 serve as evi-
dence that consolidating and integrating data is
near the top of the C-level executive’s priority
list. This represents an important step forward.
However, while executives understand the
importance of data’s role in a company, execut-
ing on an enterprise wide data strategy is still a
challenge. Overcoming technological, cultural
and business process issues and tackling the
issue not at a silo level alone remains an enor-
mous task. Success and ultimately competitive
positioning, depends on overcoming con-
straints in implementation and adoption of
enterprise data management.
What are the challenges facing financial institu-
tions in the reference data management arena?
Crowley - MiFID opens up whole new areas of
data management that traditionally have been
done only on a piecemeal basis with a view to
satisfy internal processes rather than the more
rigorous and comprehensive requirements that
the regulation will bring for market transparen-
cy. Qualifying financial institutions will have to
be able to rebuild each trade, with all their
inputs ranging from market data, emails, faxes,
voice calls and other data, to prove best execu-
tion and compliance with their internal policies.
Lammersdorf - Their challenge is always to
improve services they provide to other internal
departments at the same time as reducing
costs. However, as mentioned above, there is a
growing, if not late, realisation that money
needs to be spent in order to fulfil compliance
requirements. The financial institutions are
faced with the choice of relinquishing some of
the operational functions with regard to sourc-
ing and maintaining data. This has the usual
departmental and political implications inter-
nally, and it is the greatest challenge in the sales
process for the likes of CounterpartyLink.
Glatter - Financial institutions face an enor-
mous amount of regulations forcing them to
report to various authorities and to customers
in ever more detail. For example, MiFID
requires advisors to explain the risk characteris-
tics of financial instruments to customers. That
means you need to have accurate data on the
composition of structured instruments or on
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 19
Data Services Market Guide
the call features of bonds. On the other hand
reporting is more and more required on top
level across the entire organization. Partial and
silo solutions are not appropriate any more – if
they have ever been appropriate. All this
requires an enormous amount of additional
data and all data needs to be harmonized
across the board. A large amount of data is cur-
rently kept in local data repositories which all
have different data models. These have to be
mapped to a central data model and the miss-
ing elements have to be gathered from some-
where. Both are formidable tasks not taking
into account that arriving at a suitable data
model is a formidable task in itself.
Kennedy - Financial Services firms are constant-
ly challenged to manage a wide range of data
assets and create a solid foundation of product,
customer and counterparty and reference data
in order to run their operations more efficiently.
Historically, reference data resides in different
systems, but increasingly firms are adopting a
centralised reference data management
approach that delivers a centralised, accurate
set of cross-referenced information. In particu-
lar this helps to establish legal entity hierar-
chies to create a 360-degree view of customer
accounts and associated business transactions.
“Arriving at a suitable data
model is a formidable task.”
Regardless of whether it is acquired from exter-
nal or internal sources, reference data is used at
every point in a transaction. Centralising the
cleansing and management of reference data is
at the core of a solution to ensure that every
operation within the institution is working from
the same base information, known as the
Golden Copy. Ultimately it is essential that refer-
ence data can be consumed by down stream sys-
tems regardless of whether that system is a lega-
cy mainframe or the latest grid environment. The
reference data management platform needs to
include the ability to transport and route data
across the institution, to load balance within the
institution and to connect all relevant systems
within the technology architecture. This is the
basis of Enterprise Data Management (EDM)
which is a data integration and aggregation strat-
egy that encompasses data migration, data
maintenance, data quality assurance as well as
data control and data archiving. 
 PANEL DEBATE Data Services
Hirschfeld - The industry is still wrestling with a
number of issues: common identifiers for all
publicly and privately traded securities and
counterparties; internal business understand-
ing/support for complex data projects; and
additional standards for defining complex
financial products.
Mougin - Before anything, one thing is clear,
there is no more question about the need for a
data management initiative. All the major insti-
tutions have at least initiated a program to cen-
tralize and master their data. For the institu-
tions that start now a data management pro-
Hard-to-get OTC and derivative instruments seem to be the
hardest asset classes to work with.
gram, the first challenge is to ensure enough
support and involvement from the top-level
management, and eventually from a majority of
departments; this support is really essential. In
some cases, the second challenge is to make a
choice between outsourcing and in sourcing; all
the data area are not subject to outsourcing,
and making the difference between those
options is a very complicated question. After
selecting the right solution, the last challenge is
to not underestimate the level of the expertise
needed to complete a data management pro-
gram. In addition, a data management solution
should not only target the needs for today, it
should also be the answer for tomorrow. By
choosing the wrong solution, you may be stuck
in few months or years and not be able to
evolve and scale anymore. By choosing a flexi-
ble solution, you will continuously benefit from
advantages such as: improve your reactivity to
new business demands, integrate new business
lines, be able to replace pieces of your informa-
tion system, improve and master your relation-
ship with vendors, partners and clients.
Newbury - In the European arena, the disman-
tling of the concentration rule by MiFID
towards the end of 2007 will have a huge
impact on the quality of reference data available
in the markets. At the moment Regulated
Markets, as they are now to be known, have an
impact on standards of reference data – by
standardising naming conventions, ticker
codes and so on. Although MiFID relates in dif-
ferent ways to different instruments, the
20 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
increased roles of Systematic Internalisers,
Multilateral Trading Facilities and investment
firms themselves will lead to an erosion of the
power of the regulated markets in the reference
data area. It is vital that the industry recognises
this challenge and the use of high quality data
vendors will continue to help all parties make
the most of data they receive. In risk manage-
ment, counterparty information is gaining in
importance. The forthcoming ISO standard
16372 will introduce an International Business
Entity Identifier (IBEI). Various national num-
bering agencies have already committed to
issuing IBEI for companies domiciled in their
regions. Although the standard is not yet
finalised, all parties have agreed to issue identi-
fiers in the manner currently under discussion
and to take into account any changes that ISO
introduces. The acceptance and implementa-
tion of this code will help firms with the imple-
mentation of both MIFID and Basel II rules.
Sey - Without question, the greatest challenge
is in understanding their obligations under the
range of regulatory change that they face. Just
when most firms were coming to terms with
what was required of them, they have now been
hit with having to comply with the Markets in
Financial Instruments Directive (MiFID). Even
those firms that conclude there is relatively lit-
tle change they must undertake are finding that
the process involved in evaluating the effect of
the regulation is a significant piece of work in
itself.
What asset classes are the hardest to work with
and why?
Sey - The complexity of securitised products
and a lack of standardisation for OTC deriva-
tives have made these two asset classes the
hardest to tackle in Europe. During 2006, we
(FT Interactive Data) invested a considerable
amount of resource building platforms that facil-
itate the collection and valuation of OTC deriva-
tive products. And leveraging our experience in
the US securitised market, we have developed
offerings that we hope will improve transparency
in the European asset-backed space.

Crowley - It’s always the hard-to-get OTC and
derivative instruments; however, several niche
providers are making this easier.
Glatter - Without a sophisticated data model
and the applications for maintaining the data
and making use of it even moderately struc-
tured derivatives create problems. If data can-
not be stored in machine-readable form it is
hard to figure out the characteristics of the
instruments – both for risk assessment and for
processing. For many companies even call fea-
tures, though not really complex, create prob-
lems because of a lack of available, machine-
readable data from their vendors. The real chal-
lenges are highly structured derivatives. They
are now coming in such a variety that even
highly sophisticated data models are stretched
to their limits. The same applies to highly com-
plex bond structures like some CMOs.
Hirschfeld - Complex derivatives; structured
products and other securities whose definition
of terms is either complex, poorly understood,
or insufficiently communicated. Investment
bankers are very good at creating increasingly
complex instruments that meet unique busi-
ness and investment requirements but that are
extremely challenging to untangle for pricing
and modelling purposes.
Lammersdorf - CounterpartyLink do not work
directly with financial instruments as such, but
with the legal entities that might issue them, or
any other company, be they clients, trading
counterparties, or funds registered as individ-
ual legal entities. Having said that, by common
consent the most challenging legal entities to
research are private companies.
Newbury - Exotic assets such as CDS, CFDs and
hybrids prove to be the most difficult to find
information on. Clients tell us that they are
forced to value portfolios of these difficult
instruments. The challenges that data vendors
and clients alike share is the difficulty of secur-
ing a common set of reference data, identifiers
and regular updates for these instruments as
well as the need to constantly train staff to stay
abreast of the innovation that these product
manufacturers show! Data vendors are collabo-
rating in an ever-increasing manner to be able
to help their clients with these challenges.
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 21
Data Services Market Guide
Kennedy - Today, the forefront of financial prod-
uct innovation comes from the ability to offer
customers bespoke designed financial products
to meet specific hedging strategies or invest-
ment goals. This has given rise to investment
vehicles called structured or hybrid products
that combine both simple and complex deriva-
tives, often across asset classes. The increase
in the breadth and diversity of derivative instru-
ments and structured products in recent years
is impressive. However, providing the data
management processes to support these asset
classes and integrate them into the wider trad-
ing picture is also complex. Volumes tend to be
low but the right conditions the rewards can be
high. But this must be balanced against the
direct and indirect costs of managing them
within existing technology and risk manage-
ment infrastructures. Increased market risk,
credit risk, operational risk, IT costs and the
higher regulatory charges associated with these
products can easily erode any benefits gained.
Structured products by their nature are unique,
non-standard and fall outside any ISIN stan-
dard identification system. How does one
define uniqueness? Even if a structure is rela-
tively simple, if can often contain multiple asset
classes then the component parts may be cur-
rently managed in siloed systems. They are cur-
rently often managed through the ubiquitous
spreadsheet. It is easy to spot the dangers aris-
ing out of lack of integration. Failure to do so
can be an expensive business: firstly in the
opportunity cost of not having quality systems
and data in place to enable traders to transact
the deals and have them processed quickly; sec-
ondly, in the direct costs incurred through the
regulatory requirement for additional capital to
be allocated when systems and processes are
deemed to be below par.
Mougin - A first complex data perimeter is the
Corporate Actions perimeter. There is a clear
need from the clients to access to data with a
certain level of quality, coverage and usability.
Current vendors offers cannot be easily com-
pared, because they provide dramatically differ-
ent levels of data quality depending on the geo-
graphic areas they may cover; in some cases,
they are really focused on restricted areas. In
addition, there is still no identification for cor-
porate actions, which leads to difficulties in
merging or reconciling information coming
from multiple sources. The third parties data 
 PANEL DEBATE Data Services
perimeter also needs a lot of improvements;
this is first because of the need for a unique
identifier over all countries and all data
provider, but also because the quality of the
data available is still to be improved. This area
will evolve a lot in 2007, dragged by the various
regulatory initiatives. A correct evaluation and
“STP is one of those terms
that can mean different things
to different people.”
anticipation of the credit risk requires a careful
data management process in this area. The
OTC is a subject in itself; these trades often
cause a workflow disorder in the data manage-
ment processes: often initiated by the front-
office, they may also be retrieved from the back-
office. Sometimes they are completely out of
the data management process, but it is still
important to maintain them in a central reposi-
tory, ensuring a data consistency and complete-
ness over all asset types. Structured products
are difficult to handle for every systems, mainly
because of the lack of a standardisation; hope-
fully, some software package like SFDH are able
to handle complex products easily. In addition,
as for OTC trades, the process for structured
product is very specific.
Discuss the impact of Corporate Actions achiev-
ing STP - what would this mean to the industry?
Sey - STP is one of those terms that can mean
different things to different people. If one
assumes that it means to achieve as much
automation as is feasible and ensure that there
is a sufficiently robust method of manual inter-
vention for the events that require attention,
then the benefits become much more tangible.
This is attractive because it allows for two ben-
efits to be realised: firstly the potential reduc-
tion of cost through the elimination of a great
deal of manual work that is, by its very nature,
formulaic and repetitive. Secondly, there is the
opportunity for a very welcome reduction in risk
– the risk of incorrectly processing an event and
inadvertently exposing the organisation to huge
losses. So STP offers the potential for cost effi-
ciency and risk reduction, which together can
result in a significant step towards differentia-
tion in the marketplace.
22 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
Lammersdorf - Clearly the application of rele-
vant corporate actions in a timely manner is
crucial to achieving STP, as well as achieving
compliance with KYC and AML regulations.
Currently, many corporate action notices that
are issued concerning the entity itself are no
more than notices of intent and may therefore
not be complete or accurate. At
CounterpartyLink we store and monitor these
notices, and only action those that have been
reflected in the legal or registration evidence
used to create the data that we make available
to our clients. Again, as mentioned above,
these corporate actions are not at the asset or
instrument level, but at the corporate level, for
example, acquisitions and mergers.
Newbury - This is a subject that has been topi-
cal for a long time now. A lot of firms have
increased their STP of corporate actions using
proprietary vendor feeds and proprietary bank-
ing systems. The big push forward over the last
couple of years has been into a standard deliv-
ery of corporate actions data from all vendors
and even from the source of the data. ISO15022
is a standard that continues to undergo devel-
opment by the entire industry from custodians
to users, data vendors and network providers.
The take-up by the industry has been less
enthusiastic than had been hoped but the
Market Data Providers User Group is seeking to
assist the industry in implementing ISO15022
data by developing an Events Interpretation
Grid.
ISO15022 allows users to compare data from
different sources much more easily. The difficul-
ty is thought that each source has to encode the
data into this format, which still leaves room for
interpretation (and for that, read “error”!).
Recent discussions with Corporate Actions
issuers reveal the true extent of the difficulty.
Company secretaries in the UK for example deal
with two dividend announcements each year
and rarely have to deal with other types of cor-
porate events. It is to agent banks that they
would look to issue their announcement in a
coded format, but this would require further
legal sign-off and opens up a Pandora’s Box of
other challenges for issuers to overcome. It is
also questionable as to whether all corporate
actions can ever be STP’d. Clearly the 80-20
rule applies here. Where highly complex corpo-
rate actions are involved, generally human
intervention will be required to understand the

nuances of the corporate action. This though
represents a relatively small amount of corpo-
rate actions. If a firm can process 80% of their
corporate actions without human intervention,
then the skills used previously to deal with this
mass of simple actions can be put to better use
in higher value tasks.
Hirschfeld - There can be no true STP without a
solution to better manage corporate actions
globally. Mechanically, what this means is that
Firms must define and adopt consistent
processes, supported by the appropriate tech-
nologies (like messaging, standards protocols,
and data management systems) to source, dis-
tribute and universally apply corporate actions
throughout an organization. The fundamental
issue is that corporate actions touch virtually
every back, middle and front office system, so
without solving the process and technological
problems for how these systems interoperate,
there can be little true progress towards STP
within a Firm, or with that Firm’s counterpar-
ties and clients.
Glatter - Achieving STP for corporate actions
would greatly reduce costs and improve service
quality. Many companies have already achieved
a high percentage of STP in corporate actions
processing. Typically STP can be achieved for
specific classes of corporate actions and rather
for domestic transactions than for international
transactions. However the issuers of financial
instruments will always invent new variants of
corporate actions and regulators, especially tax
regulators, are continuing to add complexity to
the processing of corporate actions. If not
someone invents the general and final proce-
dure for all corporate actions the struggle for
automation will continue and will be either fur-
ther ahead or behind the pace of new corporate
actions variants. Somehow the industry holds
the key to STP in its hands: if they allow their
investment bankers to do all sorts of things
they can’t process, it’s no wonder STP cannot
be achieved. On the other hand innovation
means you have to invent things that cannot be
processed using traditional methods. It is hard
to find a good balance here.
What are the risks associated with global corpo-
rate actions processing and how can they be
reduced?
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 23
Data Services Market Guide
Glatter - Each country has its regulatory partic-
ularities. For each combination of issuer and
investor country you face a separate problem of
capturing tax and regulatory details. The risk is
always that an investor faces losses if such a
detail has been overlooked or treated incorrect-
ly. If the intermediary is located in a third coun-
try, this regulation can make things even worse.
Either there will be specialized data vendors
covering the most important international
aspects for the most important countries for
specific classes of instruments or the problem
has to be tackled in-house by each intermediary.
The latter keeps the know-how about corporate
actions in-house and is probably on the safe
side as long as it is not assured that there are
some very reliable providers competing with
each other. Even with the best procedures in
place, the bad habit of reporting corporate
actions too late cannot be overcome. Here
probably only a little pressure from regulators
or market supervisors will help.
Hirschfeld - The biggest risks around global
corporate actions remain two-fold: the large
number that are still done manually and the
lack of consistent, global definitions to describe
the plethora of different and often complex cor-
porate actions that exist. These risks propagate
themselves throughout an organization and to
all downstream trading and risk management
applications.
Newbury - The risks in corporate actions pro-
cessing can be distilled to just two risks, essen-
tially: missing an event or misinterpreting an
event. Both of these risks can lay the firm open
to having to pay limitless compensation to their
clients. Missing an event normally means miss-
ing an elective event, where a processor might
fail to secure the choices of its clients or might
fail to register those choices before the end of
the election period. However, it is conceivable
that an event – even a simple dividend event –
could be missed. Misinterpreting an event is
much easier to do, but can have the same cost-
ly results. Although STP rates are increasing,
firms have recognised that it is vital to retain a
high level of skills because complex corporate
actions are becoming more complex. The only
way that firms find they can be fully confident is
to use several different data sources as well as
their custodian to make sure that they have cov-
ered all possible ways of interpreting the event.
 PANEL DEBATE Data Services
As a data vendor, we work hard to make sure
our database structures are flexible enough for
our data editors to be able to enter all aspects
of a corporate action in a fully coded way so that
even our clients’ talented staff do not have to
do further interpretation.
Lammersdorf - The obvious risks associated
with corporate actions processing are the
impact that processing the action erroneously
or receiving bad information in the first place
(which has the same effect) results in the com-
pounding of downstream processes, which at
some point thereafter will need to be reversed
and corrected. Reducing the risk comes in
many forms, but top of these must be to ensure
that a consistently reliable source of corporate
actions is used prior to any action being taken
at the client site.
Sey - The ironic thing about these risks is that
they are not new world technology risks, but
rather the older world risks of language, misin-
terpretation and semantics. Corporate actions
are announced in dozens of languages around
the globe and the regulatory disclosure prac-
tices can differ greatly from one region to
another. Add to this mix the potential for mis-
interpretation – as a result of the same word
being used in different regions to describe two
events where the outcome is very different –
and we have the perfect recipe for failure. The
way to mitigate that risk is to standardise and
the good news is that tools exists in the form of
ISO 15022 messaging, together with clear guid-
ance from industry groups such as the Global
Securities Market Practice Group.
How do you address the demands of the host of
regulatory initiatives from a data integrity point
of view?
Kennedy - With more than 40 regulatory actions
scheduled to be implemented globally by 2009,
securities firms are under the gun to maintain
accurate and consistent data across their oper-
ations. From relationship management to
ongoing asset servicing, data management is a
key component to meeting regulators’ require-
ments. Regulation and risk mitigation remain
key drivers of change in the financial services
industry. As you dig a little deeper on regulato-
ry compliance, two things become apparent.
The first is that products, clients, counterpar-
24 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
ties, issuers, investment programs and owner-
ship hierarchies all need to be uniquely identi-
fied. The second is that this needs to be avail-
able from a single trusted source and intercon-
nected to promote more complete views of
data, relationships, objectives, and customer
requirements. As trading mechanisms, prod-
ucts and markets become more complex there
is also an increasing need to link front-, middle-
and back office operations. Clean, well-struc-
tured data makes this easier to achieve with
less manual effort. As securities firms grow in
operational and product complexity, they are
trading more instruments in more markets
around the world. Measuring holistic risk expo-
sure at the enterprise level requires broad and
accurate entity-level data.
Glatter - In our view there is only one way of
addressing this problem for the foreseeable
future: you have to model your data in a way
that you know every aspect needed to under-
stand the instruments. If this is the case you are
– perhaps with the exception of a few details –
always ahead of regulatory requirements. First
comes the new instrument, then regulation. In
between you have time to adjust your data
model - if this is necessary at all.
Lammersdorf - We are being methodical in our
approach to what data we gather and how we
do so, in the light of new regulation. As an
example, we are already collecting information
using processes that would be considered com-
pliant, from the regulatory point of view, if
undertaken by one of our clients.
CounterpartyLink is monitoring closely all new
regulations and other requirements for new
information, as described in, for example, The
Third EU Money Laundering Directive.
Consequently we enhance our data coverage
and methodologies to include such information
in our products. The same is currently being
done for MiFID. This is all being done, of
course, in conjunction with feed-back from
clients and prospective clients in the market.
Mougin - Sarbanes Oxley, Basel II, MiFID, Know
Your Customer - all the regulatory initiatives
have in common to highlight even more the
need for a data management program. One of
the key point for any institution that needs to
analyse or report their compliance with regula-
tory or internal rules, is to have complete and

reliable data, all over the company. In that case,
data spread into many system are a headache,
cost a lot of money and is completely unstable
and unscalable. Having a data management
program, centralising the information and shar-
ing it through multiple applications and many
users, ensures that the data available in the
“Regulatory compliance is at
heart a quality issue.”
master data system are complete and accurate.
Therefore, a data management program is obvi-
ously one of the key enabler of the compliance
with regulatory rules. In addition, when you
select a solution to implement your data man-
agement program, you need to verify that your
data management solution is comprehensive
and flexible enough to enable you to take into
account the additional data necessary either for
your business or for the compliance. Do not for-
get that new regulatory initiatives will continue
to rise.
Sey - Unfortunately, there is no short cut.
Robust processes for data collection, entry,
storage, processing and dissemination are
essential. The cleaner and more standardised
the data going in, the greater the integrity of the
data going out. That sounds easy, but in prac-
tice it has taken decades of accumulated experi-
ence to fine-tune those processes – and when
one considers the myriad of different inputs it
becomes easier to understand why. As virtually
all content has the capacity for change, howev-
er, it is critical to also have a process that deals
with the communication of changes to content
previously provided – an update mechanism.
Data integrity is about the identification and
elimination of opportunities for the corruption 
of content.
Crowley - Regulatory compliance is at heart a
quality issue. Simply storing data that may or
may not be accurate on media that may or may
not be altered at a later date will satisfy no reg-
ulator. Compliance demands a robust and reli-
able data management process that ensures
accurate data is collected and maintained in a
change-safe environment.
Newbury - As a global data vendor we serve
clients around the world. For the same client
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 25
Data Services Market Guide
operating in different roles in different coun-
tries, different regulations might apply on the
same instrument. As a data vendor, we employ
a data model which is robust enough to be able
to cope with different regulatory requirements
on the same instrument depending on where
the transaction might be taking place. For
example, we are able to flag the exact rules that
a particular paying agent must adhere to under
the European Union Savings directive. So if a
bank acts as a paying agent in the UK, they will
need to follow different rules to that of a same
bank acting as a paying agent in the US.
Similarly with MiFID, only firms with MiFID lia-
bilities will need to process the data relating to
MiFID which will be carried on an instrument.
Those not affected can simply ignore it.
Creating reference data hubs in low cost centres
to reduce costs and improve efficiency - to what
degree is this the way forward?
Hirschfeld - The market for outsourced data
management services is still evolving—we
believe that a Hybrid approach to data manage-
ment involving both a local in-house solution
coupled with an outsourced service like the
Accenture MRDS consolidated vendor model is
most appropriate. Not only will firms reduce
costs and improve efficiency, they will gain
more flexibility in how they manage their data.
The business model of an outsourced Data Hub
makes a tremendous amount of sense and is
bound to succeed.
Lammersdorf - There are two points here – low
cost centres, and reference data hubs. Low cost
centres have their obvious benefits, and as long
as the management and operational controls
are in place, this is an obvious route to go.
Creating hubs however implies using external
3rd party sources to provide information. But
why not rely on a 3rd party to create collect and
distribute such data? There is no competitive
advantage for any institution to do it them-
selves, but there certainly is a competitive dis-
advantage if they do it themselves badly, or get
data from external sources that do not provide
information from accurate and auditable
sources. Hence the need for a source that col-
lects the information from authorised and/or
regulated sites, and maintains it to at least the
standards required by the consuming firms.
CounterpartyLink’s belief is that there is a posi- 
 PANEL DEBATE Data Services
tive benefit for all our clients in providing such
a centralised repository of information, which is
our sole raison d’être and area of expertise and
competence.
Kennedy - Large financial services companies
with global reach benefit from a global
approach to centralizing their data manage-
ment functions. This provides a logical and
cost-effective means of creating a data platform
to support a firm’s current and future business
requirements, and some elements can be
derived from a shared or outsourced environ-
ment. Such an approach shifts the burden of
technology and resources to a third party spe-
cialist, allowing the institution to focus on its
core business competencies. However, trans-
forming to an outsourced model can take time
and many firms prefer to choose a phased or
hybrid approach. A managed services approach
can be extended to a model for the sharing of
outsourced components across firms. A rele-
vant example would be a shared generic data-
cleansing capability. It could be offered to mul-
tiple participants, potentially resulting in lower
costs and higher-quality data. Such an offering
would not alter the licensing and ownership of
the content, but would become a shared mech-
anism for acquiring, scrubbing and consolidat-
ing data from various sources. Additionally data
management in some environments can bene-
fit from being managed using an outsourcing
combined with an insourcing model. For exam-
ple data could be allocated more efficiently and
“Low cost is not so much the
key as high quality.”
cost-effectively, with commoditised data (such
as instruments and pricing) handled by a well
chosen managed services supplier and strate-
gic and sensitive data (such as customer and
positions) remaining within the firm. Potential
economies of scale could be a bonus from this
arrangement.
Glatter - Low cost is not so much the key as
high quality. High data quality drives down the
costs further down the processing chain. The
costs of maintaining reference data is relatively
low compared to that. The main requirement is
that people maintaining reference data have a
thorough understanding of the instruments
and the process associated with them. This can
26 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
only be gained by a thorough education and by
experience. Low cost centres tend to be in loca-
tions, where their employees can gain little
experience in the areas for which they offer serv-
ices. Therefore low cost is probably not the key
to costs and efficiency in reference data man-
agement. Rather reference data management
will require a lot of highly skilled and experi-
enced people changing their career plans from
being traders or investment bankers to manag-
ing reference data. They will certainly not do so
on low wages.
Newbury - From personal experiences I recall
only being passed from a call centre in an off-
shore centre to a call centre in Brighton or in
Lancashire when my query is even slightly off
script! I don’t feel I have seen a real improve-
ment in the frontline provision of retail services.
However, behind the scenes, it looks as though
companies are realising that they cannot simply
outsource everything. They certainly should not
look to outsource problems. If they cannot sur-
mount a problem themselves, then how can
they expect an outsourcer to do so? Companies
have become cannier in the type of work that is
being passed to such centres and in the way
they choose to move work offshore. Some
choose an offshore company to work with. In
this case companies are now making sure that
they outsource only work they are sure can be
completed to at least the same standard as
before the work was outsourced. Even those
companies who establish their own low cost
operation are being more careful about the
work that is moved there and the way the trans-
fer and ongoing management is handled. There
are reports though, that even in low cost China,
some areas of the market are seeing skills
shortages, leading to the same search for skills
as in higher cost markets. Low cost may be low
cost for now, but can low salaries make up for
the potential difficulties that are stored up and
will those salaries always stay low?
Sey - It is still too early to tell which way the jury
will go in the centralisation vs. low cost centre
debate. There have been suggestions that the
reduction in direct control is not always benefi-
cial. What is certain is that standardisation and
normalisation are the ways forward. The imple-
mentation of low cost centres may help to
achieve this by freeing up valuable resources
that can then be ploughed into realising as near

to a standards’ nirvana as possible. But low
cost centres by themselves do not reduce the
risk of error – and they certainly do not absolve
the consumer of the content of any of their
responsibilities and obligations.
“What is certain is that stan-
dardisation and normalisation
are the ways forward.”
Mougin - There is a very clear need to reduce
the cost of the data and of the data processing.
Different options exist: First, internal data man-
agement solutions, which enable to master the
costs, and to keep in line with internal needs,
but may only provide a dramatic cost cutting on
the medium/long term. Second, managed data
services, which promise to cut the cost, but do
not have the ability to take specific needs into
account, and you may still need a data manage-
ment solution to store and dispatch the data
provided; third, outsourcing services, which
promise to cut the manual processing cost
while keeping the ability to answer to specific
and future needs. In any case, verify that the
cost of the future evolutions will not overcome
the savings. The data needs are continuously
growing, pushed by the regulatory initiatives,
but also by the improvement of your business
lines and by the development of your company
on new markets. In addition, you need to evalu-
ate which degree of specific data and processes
keep you need to implement (OTC trades for
instance). It is also possible to have a mixed
solution around an internal data management
solution; to benefit from feeds prepared by out-
sourced services; to add feeds coming from
data vendors when the outsourced services are
not available; to add complementary manual
processes for specific needs and to improve
your data coverage and quality without relying
solely on services providers. Another place to
save costs is on the data itself. Selecting alter-
native data providers is possible, if your data
management solution is able to switch easily.
Crowley - Undoubtedly, off-shoring has a role to
play; most of the clients we talk to are doing
this, some of them to a significant extent. There
are probably three limiting factors at play: the
degree to which the intellectual knowledge of
the process needs to be close to the actual cen-
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 27
Data Services Market Guide
tres of business, the practical issues of project
and process management of the off shore loca-
tion, and the politics, both internal and exter-
nal. Clearly off-shoring is a growing trend that
looks set to continue, but these three factors
are likely to define the limits of how much can
be moved from the actual place of business.
Where do you see the data services market
going in 2007, what will be the key drivers?
Crowley - MiFID is the single most significant
event to hit the European market in over a
decade. It will affect the business practices of
almost all market participants: buy and sell
side, the exchanges, the data vendors and the
national regulators. Whilst there will undoubt-
edly be other factors at play, 2007 will be
defined by all the market participants reacting
to, and seeking advantage from MiFID.
Kennedy - Every bank has to deal with the three
‘R’s: Revenue, Return on operations and
Regulation. Every bank also recognizes that to
successfully address these requirements, they
need to make significant changes to their data
management platform and supporting IT infra-
structure. There is a continued need to reduce
the level of complexity and fragmentation in
order to develop the flexibility and adaptability
required for today’s competitive positioning.
The complexity stems from the fact that banks
still depend heavily on legacy systems intro-
duced many years ago. Over time, dozens and
dozens of interfaces may have been written to
these systems. This complexity and “one-off”
interface development makes it cumbersome to
make changes, adapt to a new business need,
or respond to new regulations in a timely fash-
ion. It also means banks typically lack a com-
mon way of viewing data, measuring perform-
ance and monitoring exposures. This creates
major problems when it comes to regulatory
compliance, or exposure monitoring since there
is no easy way to aggregate data and synthesize
a common view. Transforming such an
unwieldy architecture into a streamlined one
with common reference data standards and
easy access across an enterprise is achievable
with service oriented architecture.
Hirschfeld - Regulatory imperatives like Basel II
will continue to drive much of the impetus for
acquiring and deploying global, complex Data
Management Systems. Additionally, the eco- 
 PANEL DEBATE Data Services
nomic and time-to-market advantages that have
caused many firms to buy systems like AC Plus
will continue to prove attractive in convincing
both IT and Business Managers of their strong
value add.
“Risk management and
regulatory requirement level
throughout the financial
industry.”
Lammersdorf - The recurring themes are compli-
ance, risk management and efficiency, in the light
of ever increasing demand for accurate and timely
data which are themselves needed for the increas-
ingly complex applications in financial institu-
tions. There is also a need for a more centralised
view of compliance and efficiency across organisa-
tions. This all requires accurate data, properly
managed and monitored. 2007 is particularly
important in this respect as MiFID and The EU
Third Money Laundering Directive come in to
effect, amongst others. We believe that there will
be a positive impact in the data services market,
as clients either rush to find solutions as time
pressures increase, but more realistically as there
is an increased understanding that the market
spend on such data services is necessary in order
to comprehensively address each institution’s reg-
ulatory needs.
Mougin - Few key indicators are showing where
the market is going; the regulatory initiatives will
continue; the mergers will continue to happen,
with the need to rationalise, and merge their infor-
mation systems; the need to cut and master all the
costs; the competition between institutions will
continue to require more creativity, more cutting
edge processes; the competition will also lead to
new businesses, new opportunities, new lines of
products.
All those factors will contribute to require more
and more data, more and more quality, and the
data will be an even more important factor of suc-
cess and competitiveness. In addition, the infor-
mation systems, for a large part of them, now
absolutely require a large rationalisation to be able
to support the business in the future. On the other
side, the data management packages are now
more mature, and some of them can really adapt
to any situation or need, for today and for tomor-
row. 2007 should be the year of the Data
28 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
Management.
Sey - The pressure of regulatory change is clear to
see – so that still remains an issue of great con-
cern for 2007. As the industry looks towards more
and more esoteric asset classes to satisfy the need
for more diversified investments, it will be inter-
esting to see whether the legacy processes and
paradigms can still cope. Should they require
attention, the question will be whether their
change can be addressed at the same time as the
implementation of major regulatory-driven
process changes or whether the required
resources, many of which are already running at
capacity, signal a surrender...
Glatter - The importance of reference data man-
agement will gain further attention on all manage-
ment levels throughout the financial industry. Risk
management and regulatory requirements will
require more in-depth data. Therefore there might
be a tendency away from flat files in reference data
repositories to higher sophisticated data struc-
tures. This will sooner or later lead to adjustments
in the services of some data providers since flat
structures will not be sufficient any more.
Newbury - As I mentioned earlier, regulation will
continue to be a major driver throughout 2007.
MiFID will be implemented on 1 November 2007.
In late 2006 firms became aware of the scope of
this directive and started to act to define imple-
mentation projects. A number of consortia and
other organisations have stepped up to challenge
regulated markets (e.g. Project Boat, Turquoise
and Equiduct) and firms will have to spend time
learning about and then training their staff on the
new financial markets landscape. In Europe the
Capital Requirements Directive, implementing
Basel II is now in force and firms will spend time
throughout 2007 making sure that they comply by
January 2008. Risk will be a hot topic throughout
2007. On the portfolio level, firms will have to
cope with ever increasing investment into exotic
products. They will need to train staff and source
data on these to continue to be able to support
their clients and their businesses. 2007 does not
look like it is going to be an easy or a quiet year
for the markets, but then again, what is new in
this industry? 

New World
David Hirschfeld, SVP,
Operations, Asset Control
looks at the Brave New World
of Financial Data .
David Hirschfeld, Asset Control
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 29
Data Services Market Guide
The world of financial data continues to evolve
at an accelerating pace. Information continues
to be ubiquitous, pervasive and transformative.
Firms are confronting this onslaught of infor-
mation in a variety of ways, but it is becoming
increasingly clear, that only those firms that
embrace this business paradigm will continue
to thrive in the years to come.
There are four major themes emerging today
within the world of financial data: massively
compressed (i.e., shorter) time horizons;
greater emphasis on data quality (i.e., multiple
dimensions); a surge in the volume of data
from a multiplicity of sources; and an enhanced
recognition of the inter-connectivity of various
data types.
Short Time Horizons
Two forces have coalesced over the last 10
years to dramatically shorten the time-related
value of financial data: the widespread availabili-
ty of powerful hardware and software (supply)
and the dramatic growth in large, sophisticated
hedge funds (demand) with access to massive
amounts of lightly regulated capital. Because of
these two forces, even seemingly complex trad-
ing opportunities are short lived. As a result,
firms go to extreme lengths these days to
exploit millisecond trading advantages. These
trends are likely to continue, even to accelerate
over the next few years, forcing firms to evaluate
every aspect of the trading life cycle for
economies, especially economies of time.
Eventually, we expect all trading-related activi-
ties—whether front, middle or back office in ori-
entation—to take on a “real-time” nature. This
trend will likely drive software development
architecture to be: more modular, more com-
mercial, and more conformist within accepted
standards.
Greater Emphasis on Data Quality
Firms have come to appreciate the impor-
tance of data quality as well as the complexity of
data quality conceptually. Recognition of its
importance has come from the realization that
bad data can have massive costs beyond just
the obvious ones associated with manual clean-
ups. These costs range from Reputational to
Compliance and can run to many times the
superficial replacement costs. Examples of firms
that have learned these lessons the hard way
include: Barings ($2B); Mizuho ($225M);
Gibraltar Mines ($2.4B); MSDW ($15M); 
 New World - Asset Control
Freddie Mac ($125M).
Furthermore, firms have come to realize that
data quality has more dimensions (and hence
value) than just simple accuracy (i.e., right vs.
wrong). Some of the other dimensions recog-
nized for value include: granularity, timeliness,
consistency, completeness, auditability, defini-
The Internet has created
several new types of data
opportunities that previously
were non-existent, even
unimaginable.
tion, relevance and applicability. Each of these
requires more analysis and discussion than pos-
sible in this article. Suffice it to say, that each of
these dimensions can be exploited by compe-
tent knowledgeable engineers using the right
Data Management software to design rules
around how data is sourced, modeled, manipu-
lated, and ultimately delivered to their cus-
tomers. A naïve example is the back office client
who values accuracy over timeliness (an exact
dividend to be paid to thousands of external
customers on some future date) versus the
trader who values timeliness over accuracy (an
unconfirmed, special dividend announcement
that would have a significant impact on his for-
ward looking option pricing model).
Multiplicity of Sources
The Internet has dramatically reduced the
cost of acquiring and delivering financial data,
often of the most niche in nature. Previously,
only large, well capitalized companies (e.g.,
Bloomberg, Reuters, Thomson) could afford to
fund sourcing new data ventures. Today, the
market for niche information (e.g., researchers
that attend specialized and little known govern-
ment meetings) is sufficient to sustain many
small one or two man firms. Most importantly,
the cost for these small firms to instantly dis-
tribute this highly specialized data has
decreased to almost negligible levels.
Additionally, the Internet has created several
new types of data opportunities that previously
were non-existent, even unimaginable.
Examples of new data sources include: blogs
and vlogs about individuals or company prod-
30 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
ucts; metrics on web searches directly or indi-
rectly tied to companies and/or their products;
and premature, false, or disparaging informa-
tion about individuals or companies. All of this
information has the power to move markets
dramatically and all of it is of limited value in
relation to time.
Taking full advantage of these disparate data
types and sources requires ever increasingly
sophisticated Data Management software solu-
tions. These solutions parse and load the data
into large commercial databases like DB2,
Sybase and Oracle with complex, well struc-
tured data models that organize and link the
data in ways that support programmatic data
mining techniques. One example of such a soft-
ware solution which many large financial institu-
tions have deployed is Asset Control’s
Centralized Data Management (CDM) solution,
built on the firm’s flagship product, AC Plus.
Enhanced Inter-connectivity
As the scope, volume and complexity of finan-
cial data have increased, so has the value asso-
ciated with being able to link this data to sup-
port sophisticated data research techniques. To
better understand how financial data has
evolved over the last 30 years, and potentially,
what the future holds over the next 5 years, let’s
consider one particular data type: retail client
data. Figure 1 graphically displays how this crit-
ical piece of information has evolved within
many financial firms. In the 1980s, clients were
viewed in a one dimensional sense and associ-
ated data was often stored in separate, stand-
Figure 1. Evolution of financial data

alone mainframe databases. Attributes were
relatively few in numbers, maybe name,
address, date of birth, social security and some
unique internal identifier.
During the 1990s, financial firms introduced a
number of innovations which provided clients
with superior service features. These options
One would also expect the
lines between different types
of financial industry
organizations to become more
blurred over time.
included the ability to treat multiple accounts
(e.g., individual, trust, custodial, retirement) as
related entities and to combine these, for
reporting and analysis purposes, into one
“Household” account. Additional service inno-
vations in the form of electronic versions of
paper documentation (including authorizations,
transfer agreements, powers of attorney, credit
lines, etc.); on-line account access to transac-
tions and reporting services; and related finan-
cial service activities (e.g., insurance, credit
cards, banking) followed in quick succession
and became major vehicles for competition for
private and corporate accounts between finan-
cial institutions. The main objective of these
innovations during this period was to make the
suite of applications and services provided to a
client so “sticky” that it would be virtually
impossible, once they were landed, to move to a
rival firm.
More recently, during the 2000s, financial
institutions have sought to provide additional
analytical and reporting services (especially
those related to credit risk and market risk) to
meet client needs. They have also spent a con-
siderable amount on improving their ability to
mine both public and private sources to troll for
new clients and to deepen their understanding
of all varied relationships, both personal and
professional, of their existing clients. The idea
being, the more they understood their clients,
especially high net worth individuals, the more
services they could offer and the stickier these
services were in retaining clients.
In the future, it is not hard to envisage that
financial institutions will continue to tap into
wider pools of both public and private informa-
tion to better understand their existing clients
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 31
Data Services Market Guide
and to troll for new ones. This naturally includes
existing news sources, but given the expansive
nature of the Internet, will most likely also
include non-traditional sources like blogs, vlogs,
and other private and usually individually
sourced channels. It is also possible that vast
stores of generic information will become avail-
able that define both individuals and groups of
individuals with common characteristics. This
information might be mined in a variety of obvi-
ous and not so obvious ways by financial insti-
tutions. One would also expect the lines
between different types of financial industry
organizations to become more blurred over
time, especially given the many opportunities
for these organizations to jointly exploit liquidity
pools and information pools. One of the thorni-
est issues confronting our society in the future
will revolve around the ownership and use of
these new information pools.
Concluding Thoughts
We live in exciting times, surrounded by vast
pools of data waiting to be turned into informa-
tion. Financial institutions have been and con-
tinue to be particularly adept at exploiting these
pools of information in a variety of dimensions.
Commercial software vendors like Asset Control
have achieved significant market penetration
because they offer these financial institutions
superior software solutions to manage this ever
expanding universe of data. At current data
growth rates, the need for these sorts of soft-
ware solutions will continue unabated for many
years to come. 
David Hirschfeld, Senior VP of Operations, Asset Control.
During his more than 25 years in the Financial Markets,
he has had a variety of both trading, analytical, opera-
tional and technology jobs. These jobs have been at both
buy side (Citadel Investment and Tudor Investment) and
sell side (Morgan Stanley Dean Witter and Merrill Lynch)
institutions. He holds an undergraduate degree in
Economics from Duke University as well as a Masters
Degree in Economics from the University of Chicago.
 The Essential Role of Data - Interactive Data
The regulated
lives we lead…
The global financial services
industry is awash with regula-
tion, much of which is aimed
at creating market efficiencies
and transparency, as well as
reducing financial crime.
Europe is no exception as it
seeks to develop a single
market in financial services.
Regulations such as UCITS
III, Basel II, Sarbanes Oxley
Nat Sey and ‘Know Your Customer’ are
resulting in the search for transparency, examina-
tion of risk management procedures and invest-
ment in new instrument types. And here, one of
the most important factors is the availability of
data – data that does not have to be commodi-
tised.
The value of evaluations
Regulation is driving the demand for independent
valuations where no appropriate price is available
in the market – although it has to be said that
new regulation is not always about restricting
investments. Amendments to regulations such
as UCITS III are making investment in derivative
instruments more common place, and as such,
demand for valuations of over-the-counter instru-
ments such as interest rate swaps (IRS) and cred-
it default swaps (CDS) is also growing.
Some of this data has been available to the mar-
ket for some time; for example, FT Interactive
Data has been providing daily evaluations for
fixed income securities for over 30 years. Other
valuations – such as IRS and European asset-
backed securities – have been less readily avail-
able. This is either because no source exists or
because there has been a reliance on niche
providers that require an organisation to take in
and process, often manually, many feeds.
However, as the use of these instruments grows
and becomes more mainstream, valuations via
vendors such as FT Interactive Data becomes
more important. Delivery via these providers
allows integration of the valuations into well-
established data feeds, and subscribers can
benefit from the support and infrastructure of the
32 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
larger players. But it is also important that spe-
cialist knowledge traditionally held by these niche
players is available via the larger market data ven-
dors.
In pursuit of transparency
In addition to the need for valuations of these
instruments, the pursuit of transparency is requir-
ing organisations to understand the underlying
assumptions such as option-adjusted spread that
drives an evaluation, as well as having access to
the relevant terms and conditions data. Providing
this data alongside a valuation is important in
understanding the value of a security.
As regulation has also increased the focus on
risk management policies, organisations are
building complex risk models, which are driving
The industry has become
increasingly risk-focused and
active risk management is the
order of the day”
the demand for risk information such as duration
and convexity alongside the price or evaluation as
inputs to these models.
Whilst much of this data is available, it is rare to
find a single source of consistent terms,
conditions, valuation, risk and analytical data for a
wide range of instruments. In addition to its
pricing and evaluation service, FT Interactive Data
offers such supporting data for a large number
of securities.
Impact of MiFID
The effects of the Markets in Financial
Instruments Directive (MiFID) on the availability
of and requirements for market data are many
and various. Affected organisations will need to
obtain the data necessary to evaluate credit,
market and operational risk, identify the securities
in which transactions must be reported to
regulators, and get hold of the data to be included
in the reports.
Reference data is key to flagging trade venues
and individual transactions, as well as identifying
securities unambiguously. Where organisations
are covered by best execution obligations, it will
be necessary to obtain the pricing and associated
data to evaluate the best execution policy. In
order to value portfolios, organisations will need
to make decisions regarding the price used to
achieve best valuation. Should the price used be

from the most liquid market or the 'local' market?
Should the price used be from a venue included
in the best execution policy? Should an average
price be used? Should the highest price from all
venues be used, regardless of liquidity or venues
in the execution policy?
When assessing risk, high quality data – espe-
Regulations highlight the need
for high quality data available
in a timely fashion”
cially reference data – is essential. FT Interactive
Data can help organisations by providing the data
needed for MiFID compliance.
Entity linkages
2007 will prove a major test for firms risk man-
agement capabilities as a raft of new regulations
come into force. The Capital Requirements
Directive (CRD) – Basel II – designed to ensure
capital adequacy, and the Undertaking for
Collective Investments in Transferable Securities
(UCITS III), have been introduced to manage con-
centration limits for investment funds. These two
regulations are scheduled for implementation in
January and February respectively. In addition,
MiFID – due for implementation in November –
will widen the scope of financial/investment com-
panies that are required to comply with CRD.
Although CRD focuses on measuring credit,
market and operational risk for the purposes of
maintaining adequate levels of reserve capital and
UCITS III focuses specifically on managing con-
centration risk within investment funds, there are
synergies. In order to identify potential risk expo-
sure, investment and fund managers need to
actively monitor parent/subsidiary relationships
as they relate to their holdings – both at the
issuer and the parent issuer level.
To this end FT Interactive Data has recently
launched a business entity data service, which
incorporates business entity data from two lead-
ing specialist data providers. This data is
enriched by FT Interactive Data’s high quality
securities data to provide the linkages needed by
customers to manage risk exposure and meet
their compliance requirements.
Whether measuring credit risk under CRD or
MiFID, maintaining concentration risk limits
under UCITS III or monitoring total global expo-
sure, business entity data has never been so
important.
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 33
Data Services Market Guide
Data standards
A welcome side effect of the desire to increase the
transparency of processes and reporting across
the industry has been the sustained interest in
data standards witnessed throughout 2006. At a
time when the data content is becoming signifi-
cantly richer, achieving a clear and unambiguous
understanding of its meaning is critical. To that
end, FT Interactive Data is proud to have helped
promote the use of data standards such as ISO
15022 in the corporate actions space through its
participation in several industry working groups
such as the Market Data Provide User Group and
the Reference Data User Group. Furthermore,
connection to the SWIFT network has made it
easier than ever for existing SWIFT users to gain
access to the whole suite of Interactive Data offer-
ings in a much simpler fashion.
FT Interactive Data’s service of ISO 15022-for-
matted corporate action files – including rights
issues, bonus issues, mergers and acquisitions,
and redemptions – has been available directly via
the internet since August 2004 and via the
SWIFTNet network since August 2005.
Flexible delivery
Across the Interactive Data businesses much
emphasis is placed on developing strategic rela-
tionships with a range of organisations in order to
achieve the widest distribution of its added-value
data and services. FT Interactive Data has always
believed in providing its services in the preferred
format of its customers and has partnered with
the broadest array of software vendors and dis-
tributors, further adding value to its data and
increasing the flexibility of delivery for the benefit
of its customers. FT Interactive Data currently
interfaces with well over 200 software vendors
around the globe and has an expert team of more
than 30 people dedicated to vendor/customer
relationships in this area.
Regulations highlight the need for high quality
data available in a timely fashion. Interactive Data
remains committed to helping its customers
address both current and planned regulations and
standards. 
Nat Sey, Reference Data Business Manager,
Interactive Data (Europe). Mr Sey is a member of
ISITC Europe, the Reference Data User Group (RDUG)
and its corporate actions working group. He is also
Interactive Data's representative and co-chair of the
Market Data Provider User Group (MDPUG) as well
as one of the representatives on the MiFID Joint
Working Group.
 ASK THE EXPERTS

Accenture
In understanding operations
cost structures and levers, how
can the contributing factor of
poor quality reference data be
evaluated?
Sandy Weil
Accenture

There is little doubt that stagnant, incorrect or problems is an indication that data manage-
missing reference data increases operational ment has not been sufficiently institutionalized
costs through delays in trade execution, failed throughout an organization. As a result, these
trades, increased reconciliations, additional staffing roles may be undervalued and not
staff, and increased operational risk. While viewed as a desirable career path, which in turn
many agree that the critical time to implement a can bring high turnover costs and the need to
systemic data management solution has frequently train new staff. When the underlying
arrived, they often have difficulty making the problem is not addressed and the commitment
cost/benefit case to senior operations execu- to fixing it is not institutionalized, the ongoing
tives, whose success depends heavily upon min- need to address the problem will persist.
imizing costs.
There have been numerous studies of the cost Sandy Weil, Accenture
of failed trades across asset classes. Estimates
range from $25 to $300 or more, depending on
the instrument type, whether the instrument is
listed or unlisted, in which geography the trade
occurs, and whether or not they take place in
the primary or secondary marketplaces.
When asked to evaluate the cost of poor qual-
ity reference data, we begin by ascertaining a
complete profile of true costs, focusing on areas
that are directly impacted by poor quality data --
namely, failed trades and operational risk. Most
organizations manage the number of failed
trades because they know these failures are
inherently costly, but most lack reliable meas-
ures of these costs and the factors that com-
prise them.
While no one overlooks the cost of staff
required to fix poor data quality, we emphasize Sandy Weil is a senior executive in Accenture's
the importance of evaluating the total cost of Capital Markets practice and global sales lead for
staffing. Companies must be concerned not Accenture Managed Reference Data Service. Mr.
only for the hourly expense of staff and their Weil has been a key member of the Accenture
management structure but also with retention MRDS team since its inception. He joined
and retraining costs. The very need to “fix data” Accenture in 1993 and is based in New York.

34 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007


Asset Control
Martijn Groot
Asset Control
Many data vendors vie for a piece of the
action in supplying market and reference data
that powers the business processes in financial
institutions. This data includes pricing informa-
tion, corporate actions, ratings, terms and con-
ditions, settlement information and so on.
Commercial data sources are part of a some-
times lengthy supply chain with an external part
consisting of originators (issuing companies,
equity and credit rating analysts, market mak-
ers, national numbering agencies) and aggrega-
tors (brokers and exchanges, major content
providers/data sources) and an internal part
consisting of raw loaders, normalization, con-
solidation, and enrichment, right down to the
downstream applications where the golden copy
is used to make critical business decisions. That
division between suppliers and consumers,
between internal and external, is set to blur in
the future.
Firstly, some of the banks become organized
trading venues themselves. Many financial insti-
tutions have made tentative steps to collaborate
in data pooling schemes and this will continue
to grow. What started out as pooling initiatives
in for example operational risk is now spreading
to pooling of post-trade information.
Furthermore, the number of data sources will
continue to grow, either coming from con-
sumers as by-products of regulation (e.g. publi-
cation requirements for Systematic Internalizers
under MiFID) or coming out of the traditional
content providers to supply information on new
products and markets. The
frequency with which data is made available will
increase and the way in which it is offered (via
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 35
Data Services Market Guide
The new data supply chain – a
new age in data sourcing
web services, APIs, and watch lists) will become
more and more interactive compared to the tra-
ditional end-of-day batch file feed. Data pooling
and distribution models that would empower
financial institutions would help uncover a lot of
the value in locally generated data (research,
operational losses, credit ratings, prices, IOIs,
SSIs, etc.).
The future is in data sharing and pooling tech-
nologies. These can be used to satisfy regula-
tion (e.g., pooling internal loss data and internal
credit ratings), to facilitate trading (e.g., sharing
SSIs, IOIs and pooling counterparty data) or to
partner with an institution’s peers and clients
(e.g., sharing risk factors, benchmarks, EOD
and NAV data). Obviously, integration of these
different sources, transparency into the data’s
lineage, control over used sources and destina-
tions of an institution’s own data will be of criti-
cal importance here.
Martijn Groot,
Head of Product Management, Asset Control
Martijn Groot is Head of Product Management of
Asset Control where he oversees product direction
and product quality. Before Asset Control, Martijn
worked at ABN AMRO Amsterdam where he held
a variety of positions within technology and risk
management. Martijn holds an MBA from Insead,
a MSc in Mathematics from the Free University,
Amsterdam and is a certified Financial Risk
Manager from the Global Association of Risk
Professionals.
 ASK THE EXPERTS
DST International
Steve Chang
DST International
Data management projects aim to reorganise,
rationalise and streamline the flows, storage and
access to the data supporting business functions
across the enterprise. These projects can take the
form of implementing a data warehouse, introduc-
ing ETL (extract, transform, load) and EAI (enter-
prise application integration) technologies or any
combination of the above.
Asset Management companies, along with other
financial services organisactins are beginning to see
diminishing levels of return from projects using
these existing data management approaches.
Whilst well executed data management solutions
have been proven to offer significant business and
operational benefits, the improvements and returns
promised by these projects have proven to be diffi-
cult to sustain or enhance. Why is this? Investment
businesses have to satisfy three mutually conflicting
aims; increasing business performance, whilst at
the same time increasing efficiency (managing costs
alongside business growth), and simultaneously
increasing transparency for both regulators and cus-
tomers. All of this is taking place in an environment
where competitive, regulatory and market forces are
forcing an increasing pace of change on financial
institutions. The key to maximising the ongoing
benefit of existing management strategies is to find
a way to achieve a level of business agility in order
to reconcile these conflicting demands in a flexible
and responsive way.
How can this business agility be attained? As part
of an ongoing data management project we need to
continuously improve processes to make them
more dependable, agile and transparent. Many
existing data centric processes are inconsistent
because they are labour intensive, and we need to
remove inconsistencies and manual processes and
put in place a framework that will support and
enable ongoing improvements to match the dynam-
ic business environment.
However, the data management environment is a
complex one. Business processes are embedded in
36 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
What do you see driving the
next generation of data
management solutions for the
investment industry, and what
is your response?
fragmented application systems, existing business
models are hard to change, the ownership is split
between the business (who own the processes), and
IT (who manage the applications and databases).
All of this makes it hard for the business to adapt
business models to commerical opportunities and
competitive threats, and to respond to constantly
changing customer and regulatory requirements.
The requirements listed above point to a clear
need for investment in next-generation BPM (busi-
ness process management) solutions as an overlay
on existing IT centric data management technolo-
gies. BPM is defined by TowerGroup as “...a cohe-
sive enterprise discipline that leverages an independ-
ent layer of technology to model, simulate, auto-
mate, execute, monitor, and optimise repeatable and
predictable end-to-end business processes.” Using
BPM technology, which is already well established in
other industries, places ownership of the business
processes with the business where it belongs, de-
coupling it from the IT function and enabling the
business agility that the industry is seeking.
DSTi as a vendor is unique in being able to offer
both a comprehensive data management solution
for investment management organisations along-
side AWD, DSTi’s market leading business process
management product suite. DSTi can bring it’s
expertise and technology leadership to bear across
both disciplines to make the next generation of
BPM enabled data management solutions a reality.
Steve Cheng
Head of Investment Data Solutions, DST International
Steve Cheng is head of product management for DSTi’s
Investment Data Solutions where he is responsible for ensuring
that DSTi’s product line meets the investment industry’s increas-
ingly complex demands for mission critical investment data man-
agement solutions. Steve has spent the majority of his career in
the financial information and software industry in a number of sen-
ior international product marketing positions at Reuters and
Datastream. He has focused on all aspects of data management
ranging from historical financial information; investment manage-
ment systems and market data feeds.

Exchange Data International
Jonathan Bloch
EDI
The global reference database, which comprises
the data that identifies a particular security also
contains various codes that identify the specific
instruments,. This database is the lifeblood of a
securities company. Yet the database only has a
lifespan of about 12 hours since the codes are
constantly changing in response to an array of
events. If there were one simple coding system,
keeping the database current would be straight-
forward. But in reality, several uncorrelated cod-
ing systems around the world make it extremely
difficult to perform this task. Firms typically rely
on one or more corporate actions feeds to pro-
vide details of events and how they affect the var-
ious coding systems.
Fixed income securities reference data is even
more extensive and granular than equities refer-
ence data. For instance, a subordinated bond
may be secured, partially secured or unsecured.
This is information is critical when making pric-
ing decisions.
Information often must be gleaned from actual
documents. Getting access to prospectuses, pric-
ing supplements and circulars and translating
them into a different language can be difficult. It
is even more of a challenge to track changes on
redemptions and call schedules, especially in less
transparent markets.
Keeping the reference database current with
the right codes as corporate action events occur
is no easy feat, and the failure to do so can
expose the firm to tremendous risk. A 2004 study
conducted by DTCC/Oxera estimated that global
securities firms risk losing ¤8 billion per year
from poor decisions that are made based on bad
data.
Many firms have come to rely on the expertise
of third parties who understand the intricacies of
the codes and have a rulebook describing how to
apply the changes automatically. Unfortunately,
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 37
Data Services Market Guide
It’s All In The Code......
standards such as ISO 15022 will not work unless
the coding in the reference database is consistent
with the feeds coming in.
Exchange Data International often receives
changes in static data, such as codes, in advance.
The event is released as soon as possible, but
changes in the parent records are only triggered
with the change on the effective date. These tim-
ing issues need to be juggled in order to keep the
database internally consistent.
Exchange Data International believe that one
solution for securities houses is to use an inter-
nal, non-public, domain numeric ID as their pri-
mary security identifier at the global level. This
has important implications especially when pro-
ducing historical extracts. The information key
survives all changes except where the new securi-
ty is effectively a new entity, and this gives the
masterfile a stable centre.
Jonathan Bloch
CEO of Exchange Data International Limited
Jonathan Bloch is CEO of Exchange Data International
Limited (EDI), a back office solutions and securities data
provider with offices in London and New York. Bloch has
served as a non-executive director for several software and
technology companies. As chief executive of European
real-time financial data provider Tenfore Systems from
1997 to 2001, Bloch restructured the group and substan-
tially reduced monthly losses.
 ASK THE EXPERTS
GoldenSource
Tim Lind
Golden Source
All the unusually warm winter weather in New
York has created a lot of conversation on the
impact to the natural order of things. Flowers
are blooming in the wrong season, animals are
not taking their long winter naps and com-
muters don’t know whether to wear winter
coats. Our ecosystem is under attack by an
unusual weather phenomenon.
The term ecosystem is generally defined as the
entire assemblage of organisms living together
in a certain space with their environment
functioning as a loose unit. Together, these
components and their interactions with and
relationships to each other form a dynamic and
complex new whole, functioning as an "
ecological unit."
This is a concept that can actually be applied to
data manufacturing and processing in financial
services which I call “the data ecosystem,”
where data moves along the chain from data
manufacturer, to aggregator to service provider
to the institution itself. All these organisms are
also reliant on each other all striving for a bal-
ance or steady state. Like our weather, this
ecosystem is also under attack from a number
of drivers including regulations, compliance,
and savvy customers.
It’s obvious to anyone reading the news that
our natural ecosystem is changing as once
forested land is developed and species become
extinct. In the same way the data ecosystem is
also evolving brought on by the financial servic-
es industry implementing enterprise data man-
agement (EDM) strategies that have resulted in
data being viewed as a significant asset that
needs to be controlled. Firms are initiating
activities to improve data quality, ensure access
to underlying data assets and promote consis-
tent data interchange throughout the transac-
38 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
Improvements to the
Data Ecosystem Translate
to Better Data.
tion process within the data ecosystem.
The introduction of new elements to this
ecosystem such as services (like Managed Data
Services [MDS]), new processes (like centralized
enterprise-wide data models) and standards for
data definitions may have some temporary
disruptive effects. But with accurate, consistent
and trusted data as one of the core objectives, I
predict the robustness inherent in the system is
an indicator not only for a fast recovery from
this change but an improved order that’s been
in the making for over two decades.
Tim Lind
SVP Product Strategy and Management
GoldenSource
Tim Lind is responsible for strategic planning and
product management at GoldenSource, and brings
more than 18 years experience in the international
financial services industry market. His expertise
includes enterprise data management and infra-
structure, integration technology, business process
outsourcing, market and reference data, and the
financial messaging standards used by asset man-
agers, broker/dealers, and custodian banks. Mr
Lind is acting Secretariat of the EDM Council
(www.edmcouncil.org) and GoldenSource's repre-
sentative. Tim is using his extensive industry experi-
ence to continue to build partnerships with ven-
dors, institutions and the industry bodies to further
EDM strategies across the industry.
 Data Services Market Guide

Interactive Data

Regulation, risk
management... and data

Catherine Downhill
Interactive Data
The financial services industry has been flood- instruments and the entity – is necessary.
ed with new regulation, much of which demands Frequently complex and time-consuming to
enhanced risk management. For example, UCITS collect, vendors such as Interactive Data collect
III allows investment in new asset classes – but and maintain instrument level and entity level
also places emphasis on risk management. credit data, as well as link instruments and
Basel II and the Capital Requirements Directive issuers to the ultimate parent.
requires organisations to consider market, credit Operational risk, in the case of data, is often
and operational risk, and MiFID has been inter- less about what data is collected and more
preted by the FSA as saying: about how this data is collected, stored and
processed. External data vendors can provide an
“…most firms that fall within scope of MiFID independent source of data and specialise in
will also have to comply with the new Capital collecting, storing and disseminating data in
Requirements Directive (CRD) which will set standard formats with appropriate disaster
requirements for the regulatory capital a firm recovery policies in place.
must hold…” Regulation of financial services remains an
important market trend and with it comes an
Sourcing the information necessary to manage increased emphasis on the risk management.
risk can be a major challenge for organisations. Underpinning successful risk management is the
Data may be available in-house but frequently need for high quality data.
there is a need to look for external providers –
and vendors such as Interactive Data have a Catherine Downhill
range of services that can help firms in managing Business Manager,
market, credit and operational risk. Evaluated Services, Interactive Data (Europe
Underpinning market risk is the need to
determine the value of the asset, and data ven-
dors can provide an independent source of pric-
ing from exchanges as well as evaluations for the
more difficult to price assets. As investment pat-
terns change, data vendors work hard to enhance
data sets accordingly. Understanding market risk
and building risk models can also require risk
and analytical measures such as duration,
convexity and price volatility, as well as historic
data. Calculating such measures requires an
understanding of the complexities of their
calculation and the management of huge
quantities of complex data.
To assess credit risk, a credit rating for an
investment or organisation – together with the
detail of the complex linkages between these

DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 39

 ASK THE EXPERTS
Markit Group
Succession risk has been troubling the credit
default swap (CDS) market for several years,
resulting in uncertainty for investors. Under the
1999 and the 2003 ISDA Credit Derivatives
Definitions, the determination of whether or not a
corporate event has occurred and whether such an
event would substitute an existing reference entity,
giving rise to a new Successor entity, is a complex
process and often involves lengthy legal debates
which do not always reach consensus.
The Verizon Communications spin off of Idearc
in November 2006 spurred discussions over
Succession Event determinations and notices.
Verizon offered bondholders an exchange of exist-
ing Verizon debt into new Idearc debt. According
to the 2003 ISDA Credit Derivatives Definitions, if
an entity assumes more than 25% of relevant obli-
gations, then that entity becomes a Successor to
the CDS contract and the original CDS notional is
divided among the number of Successors.
However, there was ambiguity as to whether
bonds and loans or just bonds should be included
with each approach leading to a different determi-
nation. The solution was for investors to trade
contracts using special language devised by Bank
of America. For trades assuming a Succession
Event, the contract divided the CDS trades into
two new transactions, while for trades assuming
no Succession Event, the contract did not deem a
Successor. To avoid further operational
headaches, most firms agreed not to send
Succession Event notices.
The new year saw yet another high profile
Succession Event when on January 1st 2007 two
iTraxx index constituents, Sanpaolo IMI S.p.A. and
Banca Intesa S.p.A., merged to form a new entity,
Intesa Sanpaolo S.p.A. The contracts clearly end
up with one Successor entity but the debate now
hinges on whether a Succession Event notice
should be sent or not.
40 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
What consequences might
there be for CDS transactions
after a Succession Event and
is there a way of mitigating
Succession risk?
These ongoing debates demonstrate the need to
establish consensus and uniformity with regard to
Successor decisions in the CDS market. The
International Swaps and Derivatives Association
(ISDA) has been a key contributor to the current
debate by hosting discussions on the operational
impact of Succession Events in order to bring
about agreement on best practice. Markit RED
(Reference Entity Database) has been instrumental
in identifying potential Succession Events and pro-
viding the market with the information required to
make a determination.
CDS market participants and Markit RED are
exploring the possibility of creating a central
Succession Event depository to provide factual
analysis and interpretation of corporate events
while eliminating the need for Succession Event
notices. This will mitigate Successor risk and will
ensure standard market practices.
Sophia Kandylaki
Vice President – RED
Markit Group
Sophia Kandylaki is a vice president at Markit Group
Limited. As the Product Manager for Markit RED
(Reference Entity Database) in Europe, Ms Kandylaki runs
the Markit Successor working group and is responsible for
product development of Markit RED Loans and Markit
Successor.

Reuters
Bill Ruvo
Reuters
The tremendous growth in programmatic
trading has pushed market data and technology
vendors to expand their offerings to meet the
growing demands of this new customer: the
Black Box. The Black Box is a very different ani-
mal than the traditional human consumer and
its appetite is growing as more and more sell
and buyside firms embrace automated trading
as an avenue for generating revenues.
Black Box requirements begin with speed;
specifically, low latency streaming market data.
Regardless of the asset class you choose to trade,
the Black Box requires real-time quotes to drive
trade decisions. If the market is highly liquid, par-
ticular attention needs to be paid to latency
measurements and the methodology behind
those measurements. For applications trading
across multiple venues, standardization of the
various data feeds is essential to overall efficiency.
In addition to speed and breadth, the Black
Box also requires a very high level of data quali-
ty and accuracy. In terms of real-time streaming
data, corrective action is an absolute must.
Support for exchange retransmissions is essen-
tial to ensuring the accuracy of the information
driving trading decisions as well as ancillary
data such as accumulated daily volumes and
open interest. In addition, corporate action data
is required to explain certain price fluctuations,
or to normalise data when required for predic-
tive analyses, for example, to accommodate the
effect of a stock split on the price. And certainly,
models must be suitably informed as to the sta-
tus of any given issue to guard against erro-
neous trading activity such as acquiring a
futures contract at the point of expiry.
Another critical requirement of the Black Box
is a good source of historical tick trading data.
This data is essential for a number of purposes:
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 41
Data Services Market Guide
The Demands of the Black Box
researching strategies, regression testing, and
generating predictive analyses to run models in
production. It is also helpful for analysing your
trading success, and for compliance purposes.
A rather nascent Black Box staple is news.
News moves markets, and now automated trad-
ing models are incorporating the real-time
effects of news into their strategies. New servic-
es are becoming available which provide news
content that can be read by machines. News
archives are also helpful in establishing the rela-
tionships between news and market behaviours.
Finally, for best performance and lowest execu-
tion risk, it is best that all data sources share
common symbology and data structure. Having
inconsistent source symbology – one system
calling data by CUSIP and another by ISIN – is
an inefficient and potentially dangerous practice.
Similarly, trying to discern various conventions
across data services (e.g. to understand all the
names that identify “ask volume”) presents the
potential for confusion and ultimately error. For
the Black Box standardization is paramount.
Bill Ruvo
Vice President and Business Manager
Reuters Direct Feeds.
Bill Ruvo has over 20 years experience in financial services
and market data. He is currently Vice President and
Business Manager for Reuters Datafeed Direct where he
is responsible for the overall direct feed strategy and its
execution. Prior to joining Reuters, Bill was with the
ComStock division of Interactive Data Corporation where
he was Vice President, Business Development with
responsibility for ComStock’s non-organic growth strategy
with specific emphasis on direct exchange initiatives.
 ASK THE EXPERTS
SmartCo
Thierry Zemb
SmatCo
Sponsorship
The implementation of a data management pro-
gram is by nature an organisational project as it
involves data used by different processes and
actors throughout the organisation. This makes
difficult the distribution of project costs and the
measurement of the benefits brought to the vari-
ous entities of the organisation.
It is therefore critical that the sponsorship of the
project be assured at an enterprise level above the
individual entities and having a strategic vision of
organisational data management requirements.
Data management must be considered as an
enterprise-level project that contributes, on a daily
basis, to the ongoing company performance, and
strategic involvement should not be limited to the
initial success of the project.
Priorities
The implementation of an enterprise-level data
management system is an organisational project
that brings benefits to the entities using the data
domains under management. Each of these
domains can be identified and considered as a
separate project. To be able to quantify a return on
investment, and so that the benefits can be materi-
alized, it is imperative that the first data domains
to be selected be those that are directly related to
the core businesses and the strategic direction of
the organisation.
Building Applications without Development
The critical element of any data management pro-
gram is the data modeling process, as it requires
the ability to reconcile business requirements com-
ing from different organisational activities. This is
a difficult exercise for any enterprise; it requires the
involvement of operational personnel that use that
data, while requiring an abstraction to the repre-
sentation of the data. Using traditional applica-
tions tools, the impact and result of this process
are often revealed only after months of specifica-
42 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
Key Success Factors for Data
Management Project
tion and development. The ability to implement
the modeling process in real-time, produce user
screens, and implement the data acquisition, man-
agement and publication tasks, without program
development but rather by simple parameterisa-
tion, is a major advantage. Operational personnel
can participate in the application development
process, adjusting the data model and the design
choices to better conform to their requirements,
using the tool that they will be using when the
process is finished. This type of applications devel-
opment continues after the application is launched
to be able to take into account changing and
future business requirements of the organisation.
Data Ownership
Operational actors must be directly involved in the
data modeling and required quality levels for the
data for which they are the contributors.
Data insertion and updating must be done using a
clearly defined, explicit workflow that is implement-
ed in the information system, allowing rapid
response to business needs while maintaining the
required level of quality and rigour.
Whatever organisation and process is chosen for
the management of a given data domain, it is criti-
cal that the data be considered not as elements
produced by an information system but rather as
assets having value whose management is the
responsibility of the business entity producing it.
Thierry ZEMB
Product Manager, SmartCo
Thierry Zemb, cofounder of SmartCo, is the co-
designer of SmartFinancial Suite. He has 15 years
experience in financial systems as partner in consul-
tancy companies in the field of Asset Management, in
charge of development, and participated in numerous
expertise missions for its clients. He also managed the
implementation of portfolio management applica-
tions such as Decalog and Apollo for numerous French
and European Asset Managers.
 Data Services Market Guide

Standard & Poors

Illiquid securities - how credible is

your valuation data?

Peter Jones
Standard & Poors

One of the challenges faced by financial insti- growth and to meet emerging industry and reg-
tutions investing in European structured finance ulatory issues. Solutions such as ours that com-
securities is the lack of transparency and inde- bine sophisticated cash flow modelling from
pendence of pricing on European structured standardised terms and conditions data to pro-
bonds. vide valuations across the market are helping to
Market, industry and regulatory focus over the address concerns about effective asset pricing
past 18 months has encouraged securities firms within illiquid securities.
and investors to look more closely at the valua-
tion of illiquid and OTC securities within their Peter Jones
portfolios and funds. Director of Securities Evaluation Services
The introduction of more complex illiquid Standard & Poors.
products in recent years to meet clients’ sophis-
ticated trading, portfolio and risk management
strategies has driven the requirement for vali-
dated pricing, valuation data and superior deliv-
ery and support, especially within custody and
administration. Funds have significantly
increased their investment in structured finance
debt securities and additionally, the institution-
alisation of the hedge fund industry and its use
of innovative instruments has driven the growth
in securities lending services, where valuations
are an essential part of the process.
Apart from these market forces, new regula-
tions such as Basel II, MiFID, IAS39 and UCITS
III also require securities holdings to be valued
on a regular basis. The FSA’s Financial Risk
Outlook 2006 highlighted the operational risks
arising from opaque pricing of illiquid securi-
ties, including concerns about the independ- Standard & Poor’s Securities Evaluations, Inc. is a
ence and validity of margins, capital, collateral, wholly owned subsidiary of The McGraw-Hill
hedging and reporting. It also warned of risks Companies, Inc. Analytic services and products
for investors arising from performance-based provided by Standard & Poor’s are the result of
fees on funds that include complex OTC instru- separate activities designed to preserve the
ments and illiquid securitised bonds. independence and objectivity of each analytic
As the securitisation market continues to process. Standard & Poor’s has established
evolve rapidly, more timely and independent val- policies and procedures to maintain the
uations of structured finance securities are confidentiality of non-public information received
required in order for the industry to sustain its during each analytic process.

DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 43

 Enterprise Data Management - Sungard

entirely new data management platforms

An EDM that help to promote business agility, which

may also include the rationalization and
replacement of legacy systems, can help
World enable new revenue opportunities and sup-
port new or expanded business activities.

- Decreasing risk: As financial institutions

trade an increasingly larger number of
diverse asset classes, there is a greater need
for standardized processes and procedures
to help ensure a higher level of data quality.
In addition, financial institutions want to
ensure data consistency across platforms
that can be achieved by using standardized
Janet Crowley data definitions and data model. One way to
achieve this is by having a single institution-
wide process for collecting, normalizing and

The concept of enterprise

data management is not
new. But, for the financial
industry, it has become
increasingly important
over the past decade.
cleansing market and reference data.
Today, as financial services institutions Through this process, all data adheres to the
struggle to manage multiple data providers, the same quality-control measures, helping
traditional approach to data management is ensure a higher level of consistency and
simply no longer meeting the demands of the accuracy. This improvement in data quality
business. Large Tier 1 firms inherit data with audit capabilities helps to minimize
management teams, databases and systems risk, thus decreasing a financial institution’s
through acquisitions and other business exposure to mistakes and errors in trades,
opportunities and often continue to manage client reporting, and the array of down-
them as individual data silos. Costs continue stream applications that consume data.
mounting and the quality of data suffers. More
importantly, however, industry drivers are - Improving readiness in an increasing regu-
forcing these companies to closely examine, latory environment. The need to adhere to
and ultimately improve upon, the ways in which an increasing number of industry regula-
they manage their data. Tier 2 and 3 firms want tions, including Basel II, Sarbanes-Oxley,
a comprehensive yet affordable solution that MiFID and others_ means that financial
will scale with their business requirements. institutions need a data management strate-
These drivers, and an overview of the associat- gy, with auditable procedures and processes
ed EDM strategy, include: that allows them to monitor and archive all
of the necessary information. Businesses
- Increasing revenue: Tier 1 financial institu- must address both the increasing pace with
tions are looking to create cost-effective, which regulations are being introduced and
consolidated data management platforms the sheer number of global regulatory
that can keep pace with the business and efforts. The cost of failing to adhere to reg-
scale up and down as required. Developing ulations is carrying increased penalties with

44 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007


a sharp rise in the size of fines and possible
closure of operations. Commercially, if new
product development is slowed by the
requirement to meet electronic reporting or
specific auditing procedures, revenues may
be unfavorably impacted. A flexible EDM
system will help reduce that time to market.
- Reducing costs. Organizations can
help reduce costs by not only eliminating the
redundant costs of multiple siloed data
management operations but also by
leveraging the economies of scale inherent
in a shared utility outsourced managed data
service model.
The Promise of EDM
The concept of enterprise data management is
not new. But, for the financial industry, it has
become increasingly important over the past
decade. Financial institutions recognized that
managing and maintaining multiple data stores
increased costs, created duplication of effort,
and caused inconsistent data quality.
Furthermore data management was seen as
neither a core competency nor a source of com-
petitive advantage for most financial institu-
tions. Faced with the pressures to reduce risk
and costs and improve revenues and regulatory
readiness, these institutions sought to employ
a more sophisticated approach to data manage-
ment. Many were intrigued by the benefits of
developing a “Golden Copy”—or centralized
The promise of EDM is that
financial organizations can
establish a standard body
of reliable, company-wide
information.
dataset—in which all data required throughout
the organization was housed, cleansed, and
processed by using consistent standards. By
replacing a wide number of decentralized data
management solutions with a centralized or
singular "Golden Copy," companies could help
improve data quality and management.
However, as institutions began Golden Copy
initiatives, many struggled with the sheer size of
the project, competing requirements from busi-
ness unit customers, the lengthy timeframe,
escalating costs and corporate politics that
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 45
Data Services Market Guide
served to impede progress. For example, one
application area might require a Bloomberg data
feed, while another requires a Reuter’s data feed.
In addition, each department may have their own
unique data definition requirements and time-
lines that dictate the types of rules needed to
cleanse the data. Overall, institutions found a
single Golden Copy to be too inflexible and
unable to easily accommodate a wide variety of
global requirements and a multitude of different
instruments.
The promise of EDM is that financial organi-
zations can establish a standard body of reli-
able, company-wide information that can be
used to help effectively meet regulatory man-
dates and greatly reduce duplication of effort
Creating a “Golden Copy” repository is not
without its challenges. To do so, organizations
must begin the process of unifying the large
number of data silos, processes, and support
structures—while still meeting the needs of
individual business units. It requires a united
management commitment and considerable
financial investment to develop the required
infrastructure and handle the business process
changes. Moreover, these projects can become
bogged down in political red tape, as propo-
nents wrangle for consensus—greatly extend-
ing go-live dates and attendant implementation
costs. As such, they can take years to complete.
Few organizations have the bandwidth, long-
term resource allocation, focus and in-house
expert resources to tackle this sizable effort.
Over the past decade, SunGard looked for
ways to improve its own data management
processes that span multiple business units.
Leveraging its own strengths and expertise led
to the realization that some parts of the process
can be handled in a commoditized fashion—
before proprietary content or the firm’s intellec-
tual property is added. These include processes
such as data acquisition, loading and normal-
ization, matching and cross-referencing of data
and identifiers, checking and correcting.
SunGard discovered that developing a man-
aged data service utility that supports multiple
Golden Copies in the data repository, in which
numerous organizations can benefit from
shared common processes, data feeds best
practices and methodologies—while still meet-
ing custom requirements—negated the down-
falls of the traditional Golden Copy, yet still pro-
vided the same benefits.
 Enterprise Data Management - Sungard
An industry in search of a solution: the next log-
ical step
Through outsourcing, a company frees up
internal staff and resources that can be dedicat-
ed to strategic growth initiatives that will help
improve the bottom line. The contractual
nature of an outsourced arrangement increases
a disciplined stay-the-course approach.
Moreover, formal SLAs typically result in higher
quality of service. Outsourcing has been proven
successful in IT and for specific processes, but
can it work for EDM? In fact, not only can cer-
tain aspects of EDM be outsourced, doing so
provides benefits that many financial institu-
tions would not be able to achieve with an in-
house solution. These include the ability to help
leverage economies of scale and higher quality
data, reduce risk and operational and adminis-
trative headaches, more easily scale up or
down, and enhance regulatory readiness.
Not only can certain aspects
of EDM be outsourced, doing
so provides benefits that
many financial institutions
would not be able to achieve
with an in-house solution.
Flexible outsourcing models for EDM
EDM outsourcing helps minimize the redun-
dancies inherent in collecting and cleansing ref-
erence and pricing data. There are several ways
in which financial institutions can leverage out-
sourcing as part of a data management strate-
gy. And, there is the ability to outsource only the
processes or specific data that makes sense.
For example, organizations may choose to out-
source data collection, loading and exception
management functions, while retaining data
storage and distribution to applications and in-
house consumers. Alternatively the focus may
be on content for specific asset classes. In fact,
it is the organization’s business model that will
determine how and what to outsource.
Outsourcing models include:
Lift-out:
Off-shoring:
Managed service:
46 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
The benefits of outsourcing EDM
Outsourcing is a means by which organizations
can fully realize the promise of EDM. By work-
ing with a provider to handle the commoditized
parts of the data management process, finan-
cial institutions may realize numerous benefits:
- Efficiencies and lower costs through
economies of scale:
- Dramatic reduction in
implementation time.
- Reduction in business risk:
- Enables a tighter focus on core
business strategies:
- Delivery of high data quality and
improved timeliness:
- Reduction in operational and
administrative burdens:
-Scalability and flexibility to expand or
reduce the size and capability of
functions:
-Improvements in data management
operations:
-Typically, contracted SLAs are more
stringent than in-house measures.
Conclusion
In light of today’s business challenges, such as
meeting regulatory compliance, reducing busi-
ness risk, speeding time-to-revenue, and man-
aging costs, the traditional processes used by
financial organizations to manage data are no
longer effective. In fact, they can hamper a
firm’s competitive advantage. New approaches
to data management have emerged and contin-
ue to evolve. SunGard’s Managed Services for
EDM, for example, provides these firms with a
way to help leverage shared costs, minimize
risk through improved data consistency and
accuracy, as well as focus internal resources on
more strategic initiatives.
Janet K. Crowley
President, Data Management Solutions
SunGard
Janet Crowley is president of SunGard’s data management
solutions business. She has more than 16 years of opera-
tional, technical and data management experience in the
financial services industry. Prior to joining SunGard
through an acquisition in February 2002, she held numer-
ous positions including chief operating officer at
Tradeline.com, and senior vice president of product opera-
tions and director of data services at IDD Enterprises, L.P.
 Data Services Market Guide

Ever since Big Bang in 1986, it has felt that

The finish line something new happened every year in the
Financial Markets which demanded more
is in sight, and more attention from firms, away from
their core business and towards rules and

Isn’t It?
regulations.
In 1999, European monetary Union, then
Y2K and since then the regulations around the
European Union’s Financial Services Action
plan (FSAP) and additional global regulations
like International Financial Accounting

MiFID is now the law

and is a fact.
Standards and Basel II.
The additional work has had to be carried
out alongside the continuing need to innovate
and provide clients with new products, better
Richard Newbury returns and better service overall. In general,
given the upturns in financial markets and
company results, financial companies and
those providing services to them have coped
admirably with the changes. As rules like
MiFID, Basel II and UCITS III bed in through-
out 2007, the end of the FSAP is in sight and
firms can return to running their business as
usual, can’t they?
The Markets in Financial Instruments
Directive (MiFID), has been called the
“biggest change in financial markets legisla-
tion that Europe has experienced”, “biggest
shake-up of the EU financial markets to date”.
The Wall Street Journal says “There is little
doubt that the Markets in Financial
Instruments Directive (MiFID) will have a big
impact on trading in the European Union”.
The directive has been transposed into the EU
Member states as law since late in 2006, so of
course companies spent years beforehand
preparing for this change, didn’t they?
Well, research seems to show that people
believe that they didn’t. In recent studies
around 50% of respondents say that they still
do not believe that their own organisations are
ready for MiFID implementation, scheduled
for November 2007. Naturally that figure hides
varying degrees of readiness throughout
organisations, but it is still alarming that over
50% of respondents to a survey in one of the
most MiFID ready countries do not feel their
own organisation have addressed MiFID suffi-
ciently well. As new members to the EU, it
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 47
 The Finishing Line - Telekurs
would be interesting to see the results of this
survey, were it to be repeated in Bulgaria or
Romania.
The reality though is somewhat different:
Project Boat and Project Turquoise have
brought together some of the world’s biggest
banks in the world to provide alternative
Now you have to actively
monitor the way you invest to
ensure that you remain
UCITS II compliant.
reporting systems to the incumbent stock
exchanges. Equiduct has been re-launched as a
pan-European Exchange providing connectivity
to other systems. A number of companies
have set themselves up as low latency
Multilateral Trading Facilities and still more
privately admit that they will become
Systematic Internalisers.
Even solutions providers and data vendors
have been taking part in intensive industry dis-
cussions, discussions with clients and building
alliances to take on the challenges of MiFID. It
has been difficult to plan, given the fact that
final regulations are not yet ready and that
firms have adopted a “wait-and-see” approach,
at least publicly.
Rumours, sorry, market intelligence seems
to indicate that a lot of people expect MiFID
implementation to be delayed. However,
MiFID is now the law and is a fact. The
enforcement around Europe will differ for a
time, but 1 November 2007 is the implementa-
tion date and is the date from which con-
sumers can expect to be able to be treated
around Europe according to MiFID rules, or
can sue if they feel they have been treated
unfairly. 2007 is not going to be a quiet year
for anyone struggling to implement systems
and processes to prepare for MiFID. But 2007
will be an end to MiFID, won’t it?
Well, not quite. The implementation and
enforcement will in reality only start to bite
after a year or two. The European Commission
is looking into how other types of instruments
can be included in the pre-trade transparency
part of the law so more changes can be expect-
ed in coming years.
Another EU Directive, but one linked to the
global Basel II accords, is the Capital
48 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
Requirements Directive. Since 1 January 2007,
firms opting to use the simpler or intermediate
approaches for calculation of their capital
requirements have been able to do so. Does
this mean that the CRD is implemented? Well,
no. From January 2008, firms will be able to
use the advanced approach and the EU and
regulators regard 2007 as something of a tran-
sitional year from the old rules to the new
ones.
But once 2007 is finished, everything will be
done and dusted? Well, agreements may be in
place, but even at this very late stage, banks in
America, where just a handful of banks will be
affected, have complained to the White House
that the implementation rules in the US will
not be equivalent to those outside the US.
Sources say this represents the banks last-
ditch attempts to have the Basel II rules
changed.
Data vendors continue to provide credit rat-
ings on both issuers and issues as well as
making continued investments in corporate
actions information. This has included sub-
stantial investment by data vendors and solu-
tions providers to implement the ISO15022
standard which allows firms to compare corpo-
rate actions reports much more easily then
ever before. Better information management
by banks will help them reduce their risk and
allow them to take advantage of more complex
approaches to assessing how much capital
should be set aside to satisfy the CRD, freeing
up more capital for higher return activities.
What of the future? Does January 2008 rep-
resent the end of Basel II implementation?
There is already evidence that Basel III discus-
sions have begun. Anyone planning a trip to
Switzerland might want to avoid Basel hotel
reservations for another decade or so…
The last market change that I will look at
here is UCITS III. UCITS III has been in the
headlines for a number of years. Any UCITS
fund launched since February 2002 should
have been converted to UCITS III funds by the
end of December 2005. The final deadline for
the migration of all UCITS I type funds is 28
February 2007. So that’s that then. Well not
quite, unfortunately. You may have certified
your fund as UCITS II compliant, but now you
have to actively monitor the way you invest to
ensure that you remain UCITS II compliant.
As with any regulation thought, UCITS III
presents both a challenge and an opportunity.

More work for the fund manager and fund
administrator, but a vastly increased potential
customer base and lower costs of distribution.
UCITS III has resulted in two EU directives,
the Management Directive and the Products
Directive. The Management Directive aims to
provide a passport allowing fund promoters to
After the Parmalat and
Enron scandals, some
clients told us privately that
it had taken them many
months to fully understand
their real exposure to
those companies.
market a fund in all European Union states
once authorisation has been received in one
country. One of the difficulties that promoters
have faced in the past is the cost of preparing
a fund for authorisation in a new state. A full
prospectus had to be prepared in the local lan-
guage and authorisation received from the
local regulator. The Management Directive has
introduced the idea of a simplified prospectus
which reduces the amount of translation work
and legal sign-off which must be obtained. In
principle, the single passport allows authorisa-
tion to be carried out in one member state
only. These reduced barriers allow a fund to be
distributed more widely, more cheaply and
more quickly than ever before.
Of course there is a trade-off for this. The
Product Directive allows funds to invest in a
wider range of instruments than UCITS I did.
However, it also introduces fairly onerous lim-
its on the amounts of money that can be
invested in one type of instrument or one
issuer.
This last requirement is particularly onerous
– for banks and for data vendors. Who, for
example could know that if they have invested
in a bond (7 1/2 Regd. Notes 2004-13.10.11)
issued by a Czech company (OSKAR MOBIL)
that in fact that investment had to be included
in their investment limit in Vodafone Group
Plc? The challenge that data vendors are facing
– and meeting – was to link their own issuer
and instrument structures together to allow
client banks to aggregate exposure across a
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 49
Data Services Market Guide
whole group. Successful banks will be those
who use a data vendor who has tied the
process tightly into their data model and
processes and who has collaborated with a
market leader in corporate hierarchies. Some
data vendors have taken the approach that this
“module” can be an add-on. Others have
worked closely and invested significant
resource and capital to build a best of breed
solutions to benefit their clients.
After the Parmalat and Enron scandals,
some clients told us privately that it had taken
them many months to fully understand their
real exposure to those companies. The new
structures that have been introduced into data
models reduces that time for an individual
bank significantly and could even be hours
rather than days or weeks.
So although it looks as though at last dead-
lines are being reached and we can get back to
normal, there will still be repercussions for
years to come on the regulations which have
been implemented just over the last five to ten
years. Add to this the Giovannini Barriers and
the work being done to overcome those, Target
2 for Securities, changes to clearing and settle-
ment and now the recently mooted “McCreevy
Plan” and not only does that finish line still
look a long way off, but I have a sneaking sus-
picion, excuse the mixed metaphor, that the
goal posts have been put on castors.
Richard Newbury
Head of Product Services
Telekurs (U.K.) Ltd.
Mr. Newbury joined Telekurs Financial's UK subsidiary as
Head of Product Services in June 2004. His primary focus
is the development of customised solutions for clients.
Before joining Telekurs Financial, Mr. Newbury worked
for the Financial Times group's financial data vendor
unit, FT Interactive Data.
 Company Profiles
Accenture Data Management
Services provides capital markets
firms with a state-of-the-industry
managed service for acquiring,
validating, consolidating and
publishing reference data. It
provides a replacement for in-
house data management operations
with a full range of features that
improve data quality, simplify its
distribution and reduce costs
Established in 1994, Exchange Data
International is a provider of quality
and accurate international securities
administration reference data. The
company provides back office solu-
tions and securities data to most of
the major brokerage houses,
custodians, and data vendors
internationally.
Interactive Data Corporation (NYSE:
IDC) is a leading global provider of
financial market data, analytics and
related services to financial institu-
tions, active traders and individual
investors.
Markit is an industry source for
asset valuation data and services
supporting independent price verifi-
cation and risk management in
Data Landscape
global financial and energy markets.
Areas of product expertise and
service include an independent
valuation perspective on OTC
derivatives (credit, equity, FX, rates,
energy, power, metals and struc-
tured products), corporate bonds,
syndicated loans, dividend
forecasting, and index and ETF
management.
Data Services
Landscape
Our grid analyses a selection of data
providers, consultants and vendors
SmartCo produces Business Data
Management software for Finance
professionals.
With annual revenue of $4 billion,
SunGard is a global leader in soft-
ware and processing solutions for
financial services, higher education
and the public sector. SunGard
also helps information-dependent
enterprises of all types to ensure
the continuity of their business.
SunGard serves more than 25,000
customers in more than 50
countries, including the world’s 50
largest financial services
companies.
Telekurs Financial is a company in
the Telekurs Group, which oper-
50 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
ates in the fields of financial infor-
mation, payment transactions and
IT services. Telekurs Financial
specializes in the procurement,
processing and distribution of
international financial information
for investment advisory services,
portfolio management, financial
analysis and securities administra-
tion. A global network of local
financial market specialists pro-
cures real-time stock exchange
information at source from the
leading financial centres.
Containing over 3 million financial
instruments, the database of
structured, encoded securities
information maintained by
Telekurs Financial and its ten
representative offices abroad is
unparalleled throughout the world
in terms of both depth and data
coverage.
What if...
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corporate actions and counterparty data – all in one centralized solution?
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 MiFID & Reference Data
Managing
Data
Regulation
Looking at Data Management and the
Markets in Financial Instruments
Directive, the Financial Services
Authority suggests how institutions
can manage...
This introduction is designed to assist the financial com-
munity and investors in their understanding of MiFID. The
document provides a short overview on the Directive and
highlights some of the main changes likely to arise from the
organisational, conduct of business, transparency and trans-
action reporting requirements of MiFID.
PLANNING FOR MiFID
MiFID – the markets in financial instruments directive
– is to apply from 1 november 2007. its implementation will
significantly alter financial services regulation in the UK, how
firms operate their businesses and the way they interact with
their customers.
Most FSA-regulated firms carrying on investment business
are likely to be affected, whether or not that business falls
within MiFID’s scope. implementation is therefore a major
challenge, both for us and for industry.
November 2007 may seem a long way off. But preparing to
meet the challenge cannot begin too soon.
Significant aspects of the MiFID package have yet to be
agreed at european level. so we cannot be certain at this
stage about the final detail of the legislative requirements.
During 2006, treasury and the FSA will consult on the uk
implementation – and publish cost-benefit analysis – of
those final requirements (see the overview alongside).
But it is already clear that implementation will mean signifi-
cant sections of our handbook will need to be reworked – for
example, the conduct of business and systems and controls
sourcebooks. this will affect, to a greater or lesser extent, all
firms carrying on investment business, bringing changes to
the nature of their regulatory obligations to their clients and
to their supervisory relationship with us.
Potentially, there will also be new business opportunities.
More services will be passportable. and implementation
across the european union may bring about significant
changes in market structure. the precise impact will vary
from sector to sector, firm to firm. Firms that are well-pre-
pared will be positioned to make the most of these changes.
Firms are advised to start planning now to meet the imple-
mentation challenge. There is sufficient information and
detail available for that process to begin. To help you get
52 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
started, we have developed this document – planning for
MiFID – after dialogue with a number of trade associations
and they have given us some useful input for it.
Its purpose is to highlight the key impacts of MiFID and the
types of compliance and business issues that are likely to
arise, which you should consider in drawing up your plans. it
is not a consultation document.
It does not contain any FSA proposals on implementation
or guidance on interpreting MiFID. that will be covered in our
2006 consultation programme.
Much of the preparation is likely to fall into the 2006-07
and 2007-08 financial years. Senior management are advised
to earmark sufficient resource to assess the likely impacts of
MiFID on their firm, and to consider how to respond to the
business, operational and compliance issues that will arise..
Early planning will help identify implementation issues
whose timely resolution will be important to delivering an
orderly transition to the post-MiFID world. That is in the
interests of consumers, industry and the FSA.
1. MIFID OVERVIEW
What is MiFID?
The Investment Services Directive (ISD) has been the
most significant european union legislation for
investment intermediaries and financial markets since
it was implemented in 1995.
It is now being completely replaced by MiFID1 which
extends the coverage of the current ISD regime and intro-
duces new and more extensive requirements to which firms
will have to adapt, in particular in relation to their conduct of
business and internal organisation.
MiFID is a major part of the European Union’s Financial
Services Action Plan (FSAP), which is designed to create a
single market in financial services. MiFID comprises two lev-
els of European legislation. ‘level 1’, the directive itself, was
adopted in April 2004.
In several areas, however, it makes provision for its require-
ments to be supplemented by ‘technical implementing meas-
ures’, so-called ‘level 2’ legislation. the commission’s pro-
posed level 2 measures, developed on the basis of advice
provided by the committee of european securities regulators
(cesr) earlier this year, are the subject of continuing negotia-
tion at european level in the european securities committee.
formal commission recommendations for the level 2 meas-
ures (were) expected to be published in December 2005, or
in January 2006. Their final adoption, following consideration
by the european parliament, is unlikely before the second
quarter of 2006.
Nevertheless, the broad shape and nature of the level 2
measures is becoming clear. and while we cannot be
definitive at this stage, we can identify the main areas of
likely regulatory change, and some of the issues that
will arise for firms (see section below on ‘MiFID: meeting
the challenges’).
ms will be affected?
Which firm
MiFID will directly affect those firms that fall within its

scope. scope is uncertain to some degree pending the finali-
sation of the level 2 measures, as some important defini-
tions, such as investment advice and commodity derivatives,
depend on those measures.
The position of any particular firm will also depend on the
nature of that firm’s business, and whether it falls within any
of the exemptions in the directive.
In general, MiFID will cover most if not all firms currently
subject to the ISD, plus some that currently are not. I will
include:
• investment banks;
• portfolio managers;
• stockbrokers and broker dealers;
• corporate finance firms;
• many futures and options firms; and
• some commodities firms.
In some other areas, the position for firms will be less
clear-cut. Retail banks and building societies will be subject
to MiFID for some parts of their business – for example, the
sale of securities, or investment products which contain secu-
rities – but not for others.
And there is the prospect – particularly in the retail market
– of firms competing for the same type of business being
subject to different regulatory standards, depending on
whether the firm falls within the scope of MiFID. on the basis
of the needs of consumers, business efficiency and competi-
tion considerations we shall be considering whether all firms
should be subject to substantially the same requirements,
whether relating to organisational
matters or conduct of business matters.
(Directive 2004/39/ec on markets in financial instruments is
accessible at: http://europa.eu.int/eurlex/pri/en/oj
/dat/2004/l_145/l_14520040430en00010044.pdf)
In that context, some complicated judgements will be
required. Such changes will be made only where
consistent with our statutory objectives and principles
of good regulation.
The cost-benefit balance will be a major component of any
decision. But in implementing MiFID requirements we expect
to review, and potentially amend, much of the detail of our
current regime, even for firms not directly within MiFID’s
scope. We will also use this opportunity to advance our
approach to reviewing our handbook, particularly our propos-
als for simplifying the retail conduct of business regime (as
outlined in july in our consultation paper 05/10).
On this basis, the types of firm that are likely to fall outside
MiFID scope but nevertheless likely to be affected to some
extent by handbook changes associated with MiFID include:
• operators of collective investment schemes when acting
as such – for example, operators of hedge funds and pri-
vate equity funds (a special regime applies to ucits man-
agement companies);
• occupational pension scheme firms;
• life companies and friendly societies;
• financial advisers (fas) that do not hold client assets; &
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 53
Data Services Market Guide
• authorised professional firms.
so, even if your firm’s investment business is partly or wholly
outside the scope of MiFID, this does not
mean that you will be unaffected by our approach to its
implementation.
What does MiFID do?
One of the main purposes of the ISD was to give a ‘pass-
port’ to investment firms to enable them to provide invest-
ment services on a cross-border basis or to establish a
branch in another member state, in each case on the basis of
home state authorisation.
It set out some basic high-level provisions governing the
organisational and conduct of business requirements that
should apply to firms. It also aimed to harmonise certain
conditions governing the operation of regulated markets.
MiFID has the same basic purpose. but it makes significant
changes to the regulatory framework to reflect developments in
financial services and markets since the ISD was implemented.
Scope is wider …
Firstly, MiFID widens the range of ‘core’ investment servic-
es and activities that can be passported. In addition to the
services covered by the ISD, MiFID:
• upgrades advice that involves a personal recommenda-
tion to a core investment service that can be passported
on a stand-alone basis;
• clarifies that operating a multilateral trading facility
(mtf) is covered by the passport; and • extends the scope
of the passport to cover commodity derivatives, credit
derivatives and financial contracts for differences for the
first time.
A greater degree of harmonisatioon…
Secondly, MiFID sets more detailed requirements govern-
ing the organisation and conduct of business of investment
firms, and how regulated markets and MTFS operate. it also
includes new pre-and post-trade transparency requirements
for equity markets; the creation of a new regime for ‘system-
atic internalisers’ of retail order flow in liquid equities; and
more extensive transaction reporting requirements.
Doing business cross-border…
Thirdly, MiFID improves the operation of the ‘passport’ for
investment firms by more clearly delineating the allocation of
responsibility between home state and host state for pass-
ported branches and generally clarifying some of the jurisdic-
tional uncertainties that arose under the ISD. for example,
going forward, it is clear that a firm will be subject only to
home state requirements under MiFID where it provides
cross-border services from that state into another member
state. MiFID also more clearly recognises the concept of tied
agents, who will be able to carry on some cross-border busi-
ness under the passport of their principal.
Capital Requirements Directive
Fourthly, most firms that fall within the scope of Mifid will
 MiFID & Reference Data
also have to comply with the new Capital Requirements
Directive (CRD) which will set requirements for the
regulatory capital which a firm must hold.
Those firms brought into regulation by MiFID will be sub-
ject to directive-based capital requirements for the first time.
the CRD will commence on 1 january 2007; that is, before
MiFID.
It amends the banking consolidation directive and the capi-
tal adequacy directive. we have commenced consultation on
implementation of these directives and firms are referred to
consultation paper 05/3 and feedback statement 05/1. we
plan to give guidance to firms in our forthcoming consulta-
tions to assist them to determine the capital requirements
relevant to them.
2. MIFID: MEETING THE CHALLENGES
Introduction
In this section we highlight some of the main changes
likely to arise from the organisational, conduct of business,
transparency and transaction reporting requirements of
MiFID. we also comment on some of the implications for
cross-border business. we focus on the level 1 requirements
and outline in broad terms some significant changes that are
likely to arise through level 2.
2.1: ORGANISATIONAL REQUIREMENTS
What is changging?
The FSA handbook currently contains some organisational
requirements for firms. The MiFID requirements are more
extensive and our handbook will be amended to reflect this.
Firms will need to meet these new requirements when they
are authorised and then continue to meet them. The organi-
sational requirements apply on a home state basis. This
means that they will apply to a uk-authorised firm’s business,
including any business into another jurisdiction, whether the
firm is providing services on a cross-border basis from its uk
base or using a branch to provide services.
The requirements are likely to cover:
i. compliance arrangements, including measures
governing personal transactions;
ii. internal systems and controls, particularly in relation to:
* business continuity;
* staff;
* risk assessment, management and mitigation;
* internal audit;
* administrative and accounting procedures; and
* it systems and processing.
iii. outsourcing of ‘critical and important’ functions
and investment services;
iv. record-keeping, particularly in relation to
transactions undertaken for clients;
v. management of conflicts of interest to prevent the
interests of clients being adversely affected; and
vii. safeguarding of client financial instruments or
money held by the firm.
What will you need to consider?
54 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
Much of the detail in these requirements is, of course, sub-
ject to the final level 2 measures. However, it is already clear
that firms will need to consider, in particular:
i. the efficiency and effectiveness of their arrangements
for compliance and risk management;
ii. the general integrity of their systems and controls
(including internal audit and business continuity man-
agement); and
iii. their arrangements for identifying conflicts of interest
and the resilience of the organisational arrangements
used to manage them (likely to be a significant area of
change for many firms).
There is likely to be an increased focus on the ‘functional
independence’ of compliance and risk management controls.
as a result, firms will need to review the adequacy of their:
i. internal organisation;
ii. reporting lines; and
iii. allocation of senior management responsibility.
MiFID is likely to introduce new requirements to be satisfied
in the outsourcing of ‘critical and important’ functions (and,
possibly, investment services). firms will need to ensure that
all existing outsourced arrangements meet the relevant
requirements as finally agreed in level 2.
Who will the requirements affect?
The organisational requirements will apply to:
i. all investment firms within MiFID scope;
ii. all credit institutions doing MiFID business;
iii. ucits management firms (insofar as they engage in dis-
cretionary portfolio management, investment advice or
safekeeping of units in collective investment schemes); and
iv. firms or market operators running mtfs.
Our Consultation Paper on systems and controls, planned
for march 2006, will set out our proposals.
The CRD also has (high-level) requirements for systems
and controls. given the substantial overlap between firms
subject to MiFID and the CRD, we are developing a ‘common
platform’ of systems and controls requirements – that is, one
set of requirements which implement both directives, so far
as practicable.
We recognise that this common platform must be capable
of application in a proportionate way, because of the wide
variety of firms to which it will apply. in the second half of
2006, we will consider how far this approach should apply to
firms outside the scope of these directives.
UCT OF BUSINESS:
2.2. CONDU
CLIENT CLASSIFICATION
What is changing?
The client classification regime is the starting point for
many of the conduct of business changes that will affect
firms. it defines firms’ specific regulatory obligations for the
business they conduct with each category of client. the MiFID
client classification regime has similarities with the current
FSA regime, but it differs in three key respects:
i. firstly, although MiFID distinguishes between three types

of client: retail client, professional client and Eligible
Counterparty (ECP), these are not exactly the same as our
current categories of private customer, intermediate cus-
tomer and market counterparty (for example, not all inter-
mediate customers under our current rules will be profes-
sional clients under MiFID);
ii. secondly, whilst there is some flexibility for clients to
move between categories to obtain more, or less, regula-
tory protection, the criteria for doing so are not identical
to those applying under our current rules.
iii. thirdly, the regulatory protection afforded to each cate-
gory of client under MiFID will not be the same as that
provided for under the current FSA classification regime.
for example, MiFID will impose more obligations on firms
when doing business with professional clients (and some
of these are highlighted in the following sections).
The approach under MiFID to regulating business with
ECPs will also not be as ‘light touch’ as the FSA market coun-
terparty regime; for example, a firm will not be able to pro-
vide investment advice to an ecp without complying with the
relevant conduct of business requirements.
What will you need to consider?
Many firms will need to examine their existing classifica-
tions and possibly change the classification of some of their
clients. To the extent that their business processes and sys-
tems need to take account of classification decisions, firms
may need to amend these processes and systems as well as
their client documentation.
Under MiFID, both ecps and professional clients will be
able to request regulatory protection either generally, on a
trade-by-trade basis, or in relation to a ‘particular investment
service or transaction, or types of transaction or product’.
Firms will need to consider how they would administer such
a system. clients may fall into different categories in respect
of different products or services.
MiFID also contains transitional provisions which allow
firms to continue treating professional clients as such, provid-
ed certain conditions are satisfied. In our MiFID consultation
paper we will set out how we think these provisions can oper-
ate to help firms manage their transition to the MiFID regime.
Who will the requirements affect?
The client classification requirements will affect all MiFID
firms. however, the impact is likely to vary, depending on the
nature of the firm’s business and the size and breadth of its
existing client base.
For example, it is likely to be less severe for a firm that deals
only with private individuals. we will also consider the case for,
and against, using the MiFID client categorisation regime as
the basis for classifying clients doing non-MiFID business.
MARKETING
What is chhanging?
Implementation of the MiFID requirements on ‘marketing
communications’ relating to MiFID instruments or services is
likely to have an impact on the existing uk financial promo-
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 55
Data Services Market Guide
tions regime. The level 1 provisions require a firm to ensure
that all information – including marketing communications
provided to clients or potential clients – is fair, clear and not
misleading and to ensure that marketing communications
are clearly identifiable as such. This will be supplemented by
further requirements at level 2.
What will you need to consider?
Firms will need to review their financial promotions
and marketing functions, particularly to consider
whether their procedures for approving financial
promotions will satisfy the expectations of the new
regime. these procedures are likely to be fairly similar
to key elements of the existing FSA financial promotions
regime. we will consult on the necessary changes for MiFID
implementation alongside wider proposals for change result-
ing from a substantial review of the financial promotions
regime for investment business. This is likely to involve a
move towards a regime based on high-level rules that will
place more responsibility on senior management.
Who will the requirements affect?
The consultation paper reflecting the outcome of our finan-
cial promotions review is planned for april of 2006. the pro-
posals will be relevant to all firms – both MiFID and non-
MiFID scope firms – that promote their investment products
and services to retail investors. This will include, for example,
life insurance companies and other current ‘non-ISD’ invest-
ment firms.
INFORMATION ABO OUT THE FIRM AND ITS SERVICES
What is changing?
MiFID will establish requirements governing information
about the firm and its services that must be provided
to a client, whether retail or professional, including:
i. the nature and detail of the information that must
be provided;
ii. when it must be given;
iii. the form in which it must be provided; and
iv. when it must be updated.
These requirements are likely to differ from those in the
current FSA rules.
What will you need to consider?
Firms will need to consider the adequacy of:
i. procedures for capturing and generating required informa-
tion and for getting it into the relevant form in relation to the
services offered by the firm to its clients;
ii. existing mechanisms for delivering information to the
range of clients with whom they do business, and the circum-
stances in which it will be required; and • procedures for
updating information to clients. Firms will also have to con-
sider whether, in the period running up to MiFID implemen-
tation, they should start to give existing clients additional
information on the basis of the above requirements.
Who will the requirements affect?
The MiFID requirements will apply to all MiFID-scope
business carried on by MiFID firms, with more extensive
 MiFID & Reference Data
requirements for business with retail clients.
We shall be considering, and consulting upon, the extent to
which the information requirements in our current rules for
non-scope retail investment business should be adapted to
take account of MiFID.
CLIENT AGREEMENTS
What is changing?
The directive requires firms to keep a record of the document
or documents agreed with their clients effectively covering
the terms on which they provide investment services. it is not
clear at this stage whether there will be specific requirements
on the content and conclusion of client agreements at level 2.
What will you need to consider?
There are likely to be a number of specific information
provision, notification and consent requirements
deriving from both the level 1 and the level 2
provisions. where firms usually incorporate such
provisions in client agreements, it would be advisable
to plan for a review of the agreement content and
consider amendments for existing clients. additionally,
in the light of the finalised level 2 text, firms may
need to revise their agreements or terms of business
for all clients acquired after november 2007.
Who will the requirements affect?
The MiFID requirements will apply to MiFID-scope busi-
ness carried on by MiFID firms, with (possibly) more exten-
sive requirements for business with retail clients. We shall be
considering to what extent it may be appropriate to adopt any
MiFID standards for similar business carried on by non-
scope firms with retail clients.
SUITABILITY AND KNOW YOUR CUSTOMER
What is changing?
Like the current FSA rules, MiFID contains ‘know your cus-
tomer’ and suitability requirements which apply when a firm
provides investment advice and discretionary portfolio man-
agement. These are broadly similar to current requirements,
but the MiFID requirements will apply to both retail and (in
more limited form) professional clients.
What will you need to consider?
In order to be able to meet these requirements firms
will need to review:
i. the comprehensiveness and adequacy of procedures for
capturing and recording ‘know your client’ information and
providing it as appropriate to the individuals who provide
advice or make discretionary management decisions;
ii. the adequacy of arrangements for ensuring suitable
recommendations are given and investment manage-
ment decisions taken;
iii. whether current standardised fact-finding processes
(for example, for retail clients) capture all the
information required by MiFID; and
iv. their arrangements for business with professional
clients.
56 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
Who will the requirements affect?
The MiFID requirements will apply to all MiFID-scope firms
providing investment advice and portfolio management to
retail or professional clients. we shall be considering whether
– and if so how – the factfinding and suitability requirements
for retail clients of non-MiFID firms should be aligned with
the MiFID standards.
APPROPRIATENESS AND EXECUTION-ONLY SERVICES
What is changing?
MiFID will require changes to the current position under
FSArules where most investment products can be provided
on an execution-only basis. Under MiFID, an execution-only
service can be provided only where:
i. it relates to ‘non-complex’ instruments – including
shares admitted to trading on a regulated market (or
equivalent third country market), money market instru-
ments, bonds and other securitised debt (but excluding
bonds that embed a derivative) and ucits (and possibly
others, depending on the final level 2 measures);
ii. it consists only of execution of orders and/or the
reception and transmission of orders;
iii. it is provided at the initiative of the client; and
iv. the client is warned by the firm that the firm has not
assessed suitability.
For other investment products, MiFID introduces a new
requirement for firms to obtain information from clients
about their relevant knowledge and experience, and assess
whether the service is appropriate for that client. If
the firm assesses the product or service to be inappropriate it
must warn the client of that; if the client does not provide
sufficient information then the firm must warn the client it
has not been able to carry out the assessment. This is not a
test of suitability (which applies only to the provision of
investment advice and portfolio management).
Appropriateness therefore does not relate to the making of a
personal recommendation.
The application of this requirement to business done with
professional clients is still subject to discussion at level 2.
An important distinction between suitability and appropri-
ateness is that suitability requires a consideration of a client’s
financial situation and investment objectives (as well as
knowledge and experience), whereas appropriateness focus-
es just on a client’s knowledge and experience.
What will you need to consider?
Firms providing relevant services will need to assess
and decide the basis on which to provide them post-
MiFID, and whether this entails any organisational
or other business change.
firms offering services under the appropriateness test
will need to:
i. consider the adequacy of systems for obtaining
information from clients and for setting and
operating controls over client activity; and
ii. develop systems and procedures for assessing
appropriateness and carrying forward the outcomes
in the ways required by MiFID.

Firms offering services on an execution-only basis will
need to assess the adequacy of procedures for making the
assessments implied by MiFID (or, ensuring the conditions
are met) and providing the required warnings.
Who will the requirements affect?
The appropriateness requirements will primarily affect
firms that provide ‘execution-only’ dealing services in
more ‘complex’ financial instruments for retail clients.
Covered warrants, options and contracts for differences
are among the investments traded by retail customers
that may need to be considered.
Certain disclosure requirements and restrictions on certain
forms of solicitation will apply for firms that wish to provide
business on an execution-only basis.
We will be considering to what extent it may be appropriate
to adopt the MiFID standard for similar business carried on
by non-scope firms with retail clients.
BEST EXECUTION
What is changing?
The MiFID requirements on best execution will mean some
important changes to the current FSA regime. An investment
firm will be required to take all reasonable steps to obtain the
best possible result for its clients including taking into
account relevant considerations such as price, cost, speed
and the likelihood of execution and settlement when execut-
ing orders. In doing so, the firm must:
i. establish and implement effective arrangements and an
‘order execution’ policy designed to obtain the best possi-
ble results in executing client orders;
ii. disclose ‘appropriate information’ to clients about its
‘order execution’ arrangements and policy, including the
execution venues it uses;
iii. obtain prior client consent to its policy;
iv. monitor the effectiveness of its execution arrange-
ments and policy, and update them as necessary; and
v. at their clients’ request, demonstrate that their orders
have been executed according to the firm’s policy.
What will you need to consider?
Firms will need to develop an execution policy, or
review any existing policy, and obtain client consent to the
policy before undertaking any transactions.
The policy will need to cover selection of execution venues
that will enable the firm to secure the best results for clients
on a consistent basis and firms will need to keep that selec-
tion under review.
Firms will need to consider how they will monitor execution
performance by the venues included in their policy, and their
processes for determining which execution venues to use.
they will need to consider the extent to which their existing
trading strategies enable them to deliver on these obliga-
tions. This could have systems impacts for some firms and
generate wider demand for data relating to executions.
Who will the requirements affect?
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 57
Data Services Market Guide
These requirements apply to an investment firm (all bro-
kers and broker-dealers) executing client orders in both
wholesale and retail markets and to all MiFID financial
instruments. They are also likely to apply to portfolio man-
agers and order receivers and transmitters.
CLIENT ORDER HANDLING
What is changing?
MiFID requires investment firms to execute client orders
promptly, fairly and expeditiously and follows the general
thrust of existing FSArules.
Among other things, the level 2 measures are likely to
require investment firms to:
i. ensure that orders executed on behalf of clients are
promptly and accurately recorded and allocated;
• allocate aggregated orders promptly, accurately
and fairly;
• refrain from front running;
• ensure that any client assets received in settlement
of an executed order are promptly and correctly delivered
to the account of each relevant client; and
• make public client limit orders that are not immediately
executed under prevailing market conditions.
Whaat will you need to consider?
Most of these requirements are broadly similar to existing
conduct of business rules. some review of existing systems
and processes is advisable, though we do not expect that
their overall impact will be substantial for most firms. the
requirement to make public client limit orders that are not
immediately executed is a new requirement.
Firms will need to consider the details of their contracts
with clients and the venues they would use to make limit
orders public.
Who will the requirements affect?
These requirements apply to all brokers and dealers when
executing client orders in any MiFID financial instrument.
they are also likely to apply to portfolio managers and order
receivers and transmitters, such as introducing brokers.
REPORTING INFORMATION TO CLIENTTS
What is changing?
MiFID requires a firm to provide to its clients adequate
information on the service provided. In particular it sets out
requirements to ensure that clients are promptly advised of
the essential details of a transaction and receive a regular
statement with essential information on their investment
portfolio.
What will you need to consider?
The main difference is that the flexibility under existing FSA
rules for private customers to vary the content or frequency
of contract notes for reporting on transactions and periodic
information for portfolio management is not replicated in
 MiFID & Reference Data
MiFID. Those firms that use this flexibility to provide bespoke
reports to their clients are advised to review their practices,
and may need to make changes to reporting systems.
Who will the requirements affect?
These requirements apply to all firms when they carry on
MiFID business, although detailed requirements are likely to
apply only to retail clients. They are generally similar to exist-
ing conduct of business rules.
For firms outside MiFID scope undertaking retail invest-
ment business, we will be looking to retain some of the flexi-
bility no longer available to MiFID firms.
2.3 MARKETS AND TRANSPARENCY
Pre- and post-trade transparenccy
MiFID introduces comprehensive pre- and post-trade
transparency regimes for trading in shares on the three main
types of execution venues:
i. regulated markets (RMS) – these include stock
exchanges such as the london stock exchange
(lse) and virt-x;
ii. multilateral trading facilities (MTFS) – these cover
alternative execution venues (currently referred to as
alternative trading systems in the uk); and
iii. over the counter (OTC) – OTC trading refers to trades
undertaken by firms outside a RM or MTF, including
those acting as systematic internalisers.
PRE-TRADE TRANSPARENCY
What is changing?
Regulated Markets and MTFS
While there are currently no uk requirements about pre-
trade transparency as specific as the MiFID requirements,
both the lse and virt-x have trading systems and rules that
provide transparency levels tailored to the type of share being
traded and the method of trading. MiFID will introduce more
extensive pre-trade transparency requirements, particularly
for trades below specified size thresholds and for trades that
take place outside the order book.
MiFID requirements for mtfs (which are identical to those
for RMS) are very similar to what currently applies to ATSS.
Systematic Internalisattion
MiFID introduces a completely new transparency regime
for investment firms that are systematic internalisers in
shares. MiFID defines a systematic internaliser as an invest-
ment firm which – on an organised, frequent and systematic
basis – deals on own account by executing client orders out-
side an rm or mtf. implementing measures regarding the def-
inition of systematic internalisers are currently being devel-
oped at level 2. Systematic internalisers must provide firm
bid or offer quotes in ‘liquid’ shares on a continuous basis.
subject to certain waivers (see below) their quotes must rep-
resent a binding price for trades up to certain thresholds
(defined as ‘standard market size’).
Systematic internalisers have no obligation to quote in all
liquid shares; they can quote for a subset of liquid shares and
58 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
this subset can change over time. The list of liquid shares will
be defined on the basis of criteria to be set out in the level 2
measures.
Systematic internalisers will be permitted to execute orders
from professional clients at prices other than the quoted
prices in certain circumstances (e.g. if the order is larger than
a threshold determined in the level 2 measures).
The following activities will not be subject to the quoting
obligations:
i. dealing above ‘standard market size’;
ii. dealing in non-liquid shares; and
iii. dealing in other asset classes (e.g. bonds).
What will you need to consider?
RMS and MTFS will have to consider what modifications
they need to make to their rules and trading systems to com-
ply with the MiFID requirements. They will need to consider
in particular the requirements relating to trading below the
pretrade block thresholds (which will apply across the EU)
and changes they need to make to ensure that the use of
request for quote systems fall within the new regulations.
Exchange and mtf members/participants will have to
assess whether – and how – the new obligations impact on
their business models; they may also have to change their
system to meet the new MiFID requirements.
Firms executing trades outside rms or MTFS will have to
decide whether any part of what they currently do fits the defi-
nition of ‘systematic internalisers’ under MiFID and, if so,
whether the quoting obligations apply to them. Compliance
with the pre-trade obligations may involve the development of
a new business model as well as significant system changes.
Who will the requirements affect?
The new requirements directly affect RMS, MTFS and
those firms that are deemed to be systematic internalisers in
liquid shares. indirectly, the way in which these bodies
respond to the new requirements will impact on all other
firms in meeting their best execution obligations.
POST-TRADE TRANSPARENCY
What is changing?
MiFID extends the scope of post-trade transparency
requirements from RMS to MTFS and investment firms trad-
ing outside RMS or MTFS. All trading venues will have to
make public specified information about completed transac-
tions in shares as close to real time as possible (with delays
for large risk trades) and on a reasonable and non-discrimi-
natory commercial basis.
Investment firms can choose the disclosure channel – RM,
MTF, third-party or proprietary arrangements – through
which they make the details of each transaction public. the
information will have to be checked for accuracy and meet
the other criteria described above.
What will you need to consider?
RMS, MTFS and investment firms will need to consider
their internal controls for applying the new block trading pro-
visions. Investment firms that trade outside a RM or MTF will

need to consider the method by which they publish details of
their trades and the steps they will need to take to ensure the
accuracy and timeliness of publication.
Who will the requirements affect?
The new post-trade transparency requirements will affect
providers and users of equity trade data – RMS, MTFS, their
members and firms trading OTC (buy-side and sell-side
firms), as well as equity trade data disseminators.
TRANSACTION REPORTING
What is changing?
MiFID transaction reporting requirements will shift the
reporting emphasis to the competent authority of the
home/host state of the firm and not to the competent
authority of the regulated markets on which the instrument is
traded. transaction reporting refers to post-trade reporting to
regulators and does not refer to the publication of trades.
Following MiFID implementation the transaction reporting
obligations of some uk firms will be affected as follows.
Increase in the types of instruments covered while current
reporting requirements extend to debt and equity related
products, MiFID requires transaction reports for any instru-
ment admitted to trading on a regulated market – including
commodity instruments admitted to trading on exchange.
Continuation of UK standards above the minimum require-
ments of MiFID we are likely to continue to require the fol-
lowing transactions to be reported, even though MiFID does
not require this:
i. transactions in instruments that are only admitted
to trading on prescribed markets that are not regulated
markets (currently this means transactions on aim and
ofex must be reported); and
ii. transactions in otc instruments that are referenced to
instruments traded on prescribed markets. In addition,
currently the vast majority of firms must report transac-
tions in the designated investments covered by our rules
irrespective of where they are traded. it is unlikely that we
will require reporting of transactions in instruments that
are only quoted on exchanges outside the EU.
What will you need to consider?
MiFID may have a significant impact on commodities firms
which will now have to report transactions in any instruments
traded on those commodities exchanges that are regulated
markets. We are exploring the possibility of collecting MiFID
compliant transaction reports from those exchanges that
have commodity derivatives admitted to trading.
If these exchanges cannot provide us with reports that sat-
isfy MiFID requirements, then commodities firms will need
to find alternative means for ensuring that their transaction
reports are received by us.
UK firms that are remote members of overseas exchanges
will have to report transactions to us as the qualifying
exchange exemption no longer applies.
FSA-authorised firms which currently submit transaction
reports to non-UK EU exchanges will have to decide how they
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 59
Data Services Market Guide
will report transactions to us once MiFID is implemented.
under MiFID, trades on non-EU exchanges will still need to
be transaction reported by firms if the subject instrument is
also traded on a regulated market in the EU. For example, a
transaction in IBM common stock on the NYSE will still need
to be reported as the instrument also has a London quote.
It is unlikely that uk firms will have to report transactions in
instruments that are not admitted to trading on any
exchange within the EU.
Finally, we believe that, similar to the current rules,
firms that conduct discretionary investment management
business can satisfy their MiFID reporting requirements if
they can guarantee that their sell-side brokers report the
trades to us. These investment firms will be required to trans-
action report electronically if they trade instruments caught
under MiFID with counterparties that are not fsa-authorised
brokers – e.g. other investment firms or overseas brokers.
Who will the requirements affect?
Potentially all firms, depending on the nature of their
business. Firms that undertake business
only in UK-traded instruments that are not commodity linked
will be least affected.
All firms will have to ensure, post-MiFID, that existing
transaction reporting arrangements cover all the relevant
instruments and are received by the relevant authority, which
in the case of all uk-based activities will be the FSA.
2.4 CROSS-BORDER BUSINESS, BRANCHING AND
PASSPORTING
What is passporting?
Currently, firms that are authorised in one member
state can provide ISD services in other member states either
cross-border or through a branch without having to be autho-
rised separately in each member state in which they wish to
do business – this is known as the ‘passport’. MiFID extends
the range of activities and instruments covered by the pass-
port and clarifies the home/host supervision of passported
firms. In particular, MiFID:
i. upgrades advice that involves a personal recommenda-
tion to a core investment service that can be passported
on a stand-alone basis;
ii. clarifies that operating an MTFis covered by the
passport; and
iii. extends the scope of the passport to cover commodity
derivatives, credit derivatives and financial contracts for
differences for the first time.
The above extract is from the ‘Planning for MiFID’ docu-
ments published by the UK’s Financial Services Authority.
With kind permission of the Financial Services Authority.
ISJ
 MiFID & Reference Data
Reference Reference
The Implications for Reference
Data under the Markets in
Financial Instrument Directive
(MiFID – Directive 2004/39/EC).
ISJ presents highlights of the
Reference Data Subject Group
(RDSG) analysis of MiFID.
1. About the MiFID JWG and RDSG
The MiFID Joint Working Group (MiFID JWG) was created
by four industry associations – FIX Protocol Ltd, ISITC
Europe, RDUG, and FISD/SIIA (see below) on 04 April 2005.
The MiFID JWG operates as an inclusive, pan-European
body of representatives from all sectors of the financial serv-
ices industry. The aim of the MiFID JWG is to be a primary
industry reference point for the business processes impacted
by MiFID – liaising with the European Commission, CESR,
national market regulators and relevant national and
European bodies.
The four industry associations will pool their efforts and
resources to develop best-practice recommendations, appro-
priate standards and increased industry awareness of issues
such as:
i. how to achieve best execution for their clients for all
relevant asset classes
ii. how to address reference data issues relating to
instruments and entities
iii. how to publish/report quotes and prices, especially
for off-exchange trading
iv. how to meet the European Commission’s request that
the industry should agree and develop a standard proto-
col to help with MiFID compliance. www.MiFID.com
FIX Protocol Ltd is a global standards organisation that
manages, develops, and maintains industry-driven messag-
ing standards for the financial services industry. Its mem-
bers include exchanges, banks, brokers, investment man-
agers, market data vendors, and application software
providers. The FIX (Financial Information eXchange)
Protocol is used by thousands of brokers, investment man-
agers, and exchanges internationally as a standard means of
exchanging pre-trade, trade, and post-trade messages.
www.fixprotocol.org
ISITC Europe is a working committee of securities opera-
tions professionals representing custodian banks, invest-
ment managers, brokers, and vendors. The group's mission
is to foster alliances and advocate standards that promote
straight through processing (STP) of securities transactions.
The members of ISITC Europe actively participate in and
influence industry-wide initiatives that promote direct elec-
tronic processing and information flow among all industry
participants, throughout the entire trade life cycle.
www.isitc.org
The Reference Data Users Group (RDUG) enables repre-
sentative members of the global securities markets and sup-
pliers to debate the issues and evolve solutions which sup-
port improved market practices, better STP, and improved
operational compliance given the growing awareness of the
60 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
costs risks and value associated with market reference and
descriptive data. The RDUG was founded in June 2002, and
now comprises over 200 investment manager, broker/dealer,
custodian banking, market infrastructure, and supplier enti-
ties. www.iisitc.org
FISD/SIIA (the Financial Information Services Division of
the Software and Information Industry Association) is the
global forum for the financial information industry. Its
members include exchanges, banks, brokers, investment
managers, market data vendors, and application software
providers. www.fisd.net
2 Background and Summary of Recommendations
The EU Directive 2004/39/EC on Markets in Financial
Instruments was adopted by the European Parliament and
European Council on 21st April 2004 and is due to go into
effect on 01 November 2007 (having already been delayed 18
months to allow for implementation). This directive aims to
create greater market transparency and to ensure “best exe-
cution” for investors, whether trading occurs on- exchange
or off-exchange, across a multitude of asset classes from
exchange traded to OTC and derivative instruments.
The EU Commission and CESR/TTF have consulted with
the industry and have established that MiFID may have sig-
nificant impact on several components of reference data,
specifically the identification of instruments, investment
firms (and all counterparties), and trading venues (markets).
The MiFID JWG RDSG proposes the following for usages
of reference data:
i. The rigorous adoption of the ISO 10383 MIC (Market
Identification Code) to identify Place of Listing (POL),
Place of Trade (POT), and Place of Quote (POQ) for both
instrument and venue identification;
ii. To extend the ISO 10383 MIC to cover all MTFs
(Multilateral Trading Facilities) as well as RMs
(Regulated Markets).
ii. To utilize the IBEI (International Business Entity
Identifier) to identify Systematic Internalisers pending
scope clarification by the European Securities
Commission and review of feedback to ISO regarding
ISO 16372 IBEI.
iii. The use of appropriate instrument codes to identify
the instrument, where necessary in conjunction with
POL and POT/POQ;
iv. To encourage the use of ISO 10962 CFI (Classification
of Financial Instrument) codes for the classification of
instruments where there is uncertainty regarding instru-
ment coding or precise type;
v. To press ahead with the development and subsequent
adoption of the ISO 16372 IBEI standard, including (if
necessary) an interim BEI solution.
3 About MiFID
The EU Directive 2004/39/EC on Markets in Financial
Instruments (MiFID pronounced “miff-idd”) was adopted by
the European Parliament and European Council on 21st April
2004. MiFID will affect participants in the financial services
industry in all existing 25 (and future) member states of the
EU across their activities in almost all asset classes. MiFID
aims to create greater market transparency and to ensure
“best execution” for investors, whether trading occurs on-

exchange or off-exchange.
Investment firms, exchanges, trading platforms, and mar-
ket data vendors will all have to adapt their business
processes and their IT systems in order to comply with
MiFID. This EU Directive is due to be implemented in the
national law of all EU member states on 01 November 2007,
leaving approximately 22 months for market participants to
analyse requirements and implement the necessary changes.
The European Commission and the Committee of
European Securities Regulators (CESR) are continuing to
consult with the financial services industry as a whole in
order to define in detail what compliance with MiFID will
mean. The industry has also been asked by both the
European Commission and by CESR to recommend stan-
dards that would help market participants to implement the
necessary changes.
Considering the complexity of the technical systems in
Member States and the implementation deadline, CESR saw
the need for an in-depth analysis and for work on how to
exchange transaction report data between competent
authorities. Therefore, in October 2004, CESR decided to
set up a Technical Task Force (“TTF”) as a subgroup of the
Expert Group and published two papers (CESR 05/398b and
CESR 05/398 Appendices) in June 2005 which examined the
issue of how to achieve an appropriate level of data quality
and to use the common bargaining power when acquiring
the reference data from third parties.
Apart from investigating the different ways and means, the
TTF identified the possible need to create and maintain sev-
eral reference databases for the (unique) identification of cer-
tain subjects – in particular, financial instruments, invest-
ment firms, and trading venues. MiFID’s range is pervasive
– its scope covers Best Execution, Client Order Handling,
Pre- and Post-Trade Transparency, Knowledge of Client and
Information Disclosure, Conduct of Business, Conflict of
Interest Management, Transaction Reporting, and the
Storage/Retrieval of Instrument and Client Data. Along each
of these domains, there is a medium to significant impact on
the management of market and reference data – the funda-
mental details on every customer, security, and transaction,
consisting of critical data components that identify, qualify,
and enrich the trades, and enable business processes and
workflows in front, middle, and back offices.
4 Scope – Instrument and Business Identification
This document seeks to address the identification of sub-
jects identified by the CESR Technical Task Force – namely
financial instruments, investment firms, and trading venues.
Instruments
Instrument identification is a pervasive component of the
financial industry – and not without its complications.
MiFID brings these difficulties into light thus requiring the
industry to focus on a solution that is consistent with cur-
rent practices and capabilities but also in harmony with
MiFID’s objectives. Unique (or Unambiguous) Instrument
Identification is covered in detail in Section 5.
Classification of Financiaal Instruments
The classification of a financial instrument can help in its
identification and is thus related to UII. The MiFID JWG
RDSG has examined ways of representing the classification of
instruments in the form of a hierarchical structure.
Classification will be essential as MiFID’s implementation
expands in coverage to include instruments other than equi-
ties where there is uncertainty regarding either instrument
coding or precise type (e.g. convertibles – equity or debt).
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 61
Data Services Market Guide
Both the ISO 10962 CFI (Classification of Financial
Instrument) code and the (similar but different) MDDL cod-
ing schemes provide a hierarchical representation of instru-
ments. The MiFID JWG RDSG proposal is to adopt the ISO
10962 CFI for this purpose (note: although CFI may need
adjusting to match market requirements).
Business Entities
Investment firm identification – indeed all business enti-
ties involved in the lifecycle and trading of a financial instru-
ment – require a unique identifier not only in the MiFID con-
text but in many of the directives and policies prevalent in
the global regulator environment. A business entity identifi-
er (BEI) would uniquely identify business entities playing a
role in the lifecycle of, and events related to, a financial
instrument. Indeed, the ISO organization has defined a
standard for an International BEI (IBEI) that could be used
unilaterally across the industry. Business Entity
Identification is discussed in Section 7.
Markets and Trading Venues
The identification of trading venues is addressed, in part,
by the International Organization of Standards (ISO) stan-
dard 10383 Market Identification Code. All formal markets,
exchanges, multi-lateral trading facilities, and organized
trading venues should be identified in this standard. Note
that Systematic Internalisers are NOT formal markets and
should not be included in the list (they are all to be identi-
fied with an IBEI). The list of currently defined MICs, and
instructions for requesting updates to the list, can be found
at http://www.iso15022.org/. The identification of markets
and Systematic Internalisers is discussed in Section 6.
5 Unique (Unambiguous) Instrumeent Identification
The Markets in Financial Instruments Directive (MiFID)
requires that pre-trade quotes and trade information be
reported to the market in a timely and accessible fashion. In
a modern environment where multiple securities are issued
into various markets with varied parameters (currency, lot
size, ownership), the identification of the instrument being
quoted or traded is problematic. In order for the information
reported under MiFID to be of value, a standardised way of
identifying instruments is required.
This version of the MiFID JWG RDSG Discussion Paper
focuses on exchange-traded instruments – a future version
will cover OTC-traded instruments and other derivatives.
In a white paper published in June 2003 RDUG, in con-
junction with FISD’s Reference Data Coalition (REDAC),
elaborated that agreement on a common vocabulary in dis-
cussions associated with Unique Instrument Identification
(UII) is absolutely critical.
Semantics and slight differences in terms and definitions
create confusion in the industry and divert attention away
from the objectives of these activities. Additionally, the
group noted in the paper that unique instrument identifica-
tion would be a key component of efficient processing of
instruments through pre-trade, trade, and post-trade. The
paper offered definitions for “Place of Listing” (POL) in
favour of the terms “market level identifier” and “country
level identifier” to identify where an instrument is legally
registered for trade. The paper suggested eliminating the
concept of the subjective terms “primary market” and “sec-
ondary market” preferring “Place of Trade” (POT) – or Place
of Quote (POQ) – to identify where an instrument trades or
quotes. POL and POT (for most venues) can be identified
with the ISO 10383 Market Identification Code (MIC).
Existing works on instrument identification focus on the
 MiFID & Reference Data
desired “Unique Instrument Identification” – a single identi-
fier that could UNIQUELY identify the specific fungible or
traded financial instrument to the satisfaction of all parties
involved. Previous conclusions, and recent experiences,
have confirmed that a single unique instrument identifier
throughout the trade lifecycle, under the current state of the
industry, is unattainable. Indeed, the term “unique” identifi-
er is a misnomer. The best, and perhaps most relevant,
objective possible is to unambiguously identify the instru-
ment with an identifier consistent with the needs at each
stage of processing.
In some markets, the International Security Identification
Number (ISIN) is unique because that security is only traded
within a single market – or within markets that have trading
privileges with the home market. But when a security is
issued into multiple markets with different listing and trad-
ing regulations, multiple currencies, and various trading
parameters (like lot size or settlement restrictions) where
the prices of these instruments are independent then the
ISIN alone is not sufficient to differentiate pricing at a level
that is meaningful to the investor.
An ISIN identifies a security created by an issuer – whether
it be an ordinary (common stock) or fixed income device –
but does not identify the parameters of the issuance of that
security into markets where it can be exchanged.
As a result, a single security can be sold in various forms in
various markets under the same name BUT two instruments
derived from the same security may not be immediately fun-
gible with one another. When considering buying or selling
the question must be asked: “If I purchase instrument A on
market B in currency C, can I immediately turn it around and
sell it as instrument X on market Y in currency Z? If not,
what must I do to convert it (if at all possible) and what will
my costs be?” In that sense – the combination of the market
and the instrument identifier within that market – for exam-
ple the “local ticker code” or market level identifier (MLI) –
does unambiguously identify the instrument. Again, this
identification scheme alone is not sufficient because many
instruments use different identifiers on different markets
and, at face value, the investor cannot compare them. A way
must be derived that is clear and unambiguous.
Under MiFID, market transparency is a major goal – but
reporting of quotes and trades is only valuable if the identifi-
er(s) used are relevant to the target audience AND these
identifiers can help the investor determine which instru-
ments are fungible within the investor’s holdings (or desired
holdings).
5.1 Considerations for Instrument Data in Light of MiFID
The Markets in Financial Instruments Directive replaces
the Investment Services Directive (ISD) to harmonise regu-
lation across the wider range of investment vehicles and exe-
cution venues extending to all EU member states. Its scope
encompasses best execution, order handling, pre- and post-
trade transparency, conduct of business, client agreements,
client classification, conflicts of interest, transaction report-
ing, and record-keeping. MiFID expands the existing ISD
definition of financial instruments to include additional fre-
quently-traded instruments including OTC-traded instru-
ments such as interest rate swaps (IRSs), contracts for dif-
ference (CFDs), and other types of derivatives such as credit,
commodity, weather, and freight derivatives.
MiFID recognises and formalises the reality of instruments
trading across a span of different types of execution venues,
defined as follows:
62 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
a. Regulated Market: MiFID definition, Art. 4 (14): A mul-
tilateral system operated and/or managed by a market
operator, which brings together or facilitates the bringing
together of multiple third-party buying and selling inter-
ests in financial instruments – in the system and in
accordance with its nondiscretionary rules – in a way that
results in a contract, in respect of the financial instru-
ments admitted to trading under its rules and/or sys-
tems.
b. Multilateral Trading Facility (MTF): MiFID definition,
Art. 4 (15): Means a multilateral system, operated by an
investment firm or a market operator, which brings
together multiple third party buying and selling interests
in financial instruments – in the system and in accor-
dance with non discretionary rules – in a way that results
in a contract in accordance with the provisions of Title II
of MiFID.
c. Systematic Internaliser: MiFID definition, Art. 4 (7): An
investment firm which, on an organised, frequent and
systematic basis, deals on [its] own account by executing
client orders outside a regulated market or an MTF.
These entities will be required to publish firm accessible
quotes in size bands on a continuous basis during trad-
ing hours in shares they deal in that are quoted on a reg-
ulated market.
MiFID will pose data publication, dissemination, consolida-
tion, and monitoring challenges for market and investment
professionals, particularly those looking to justify best execu-
tion processes, demonstrate pre- and post-trade transparen-
cy, or ensure adequate record-keeping through the storage
and effective retrieval of client or market data. Given that
market/source identification, security identifier, date/time of
trade, price per share, and volume are critical elements that
need to be made public on a trade-by-trade basis, it is clear
that market and reference data standards are a pre-requisite
for MiFID.
The documents published by CESR – CESR/04-261b
(Boxes 12/13), CESR/05-290b (Box 17) and CESR/05-398b
(Appendices), published June 2004, May 2005, and July
2005 respectively, already make extensive reference to the
need for precise instrument identification based around ISO
6166. Clearly, this assumption works well for securities trad-
ed on a regulated market or securities which do not happen
to be listed in multiple markets. However, as mentioned
earlier, multi-listed securities and OTC-traded instruments
will need precise instrument identification that goes beyond
the allocation of ISO 6166 (ISINs).
5.2 Definitionss of Terms
Throughout this document, common terms are used to
describe very precise ideas. Although some of these terms
may be counter to common human communication norms,
unique terms are required to avoid confusion – for example
with the terms “instrument”, “issue”, and “financial instru-
ment”. These definitions are not dictionary quality – but are
placed in context for clarity and augment the definitions pro-
vided by MiFID (as in Section 5.1 above).
Security, Financial Instrument, Issuer, ISIN, CFI
A security is a type of financial device (loosely called finan-
cial instrument) created by a company or organization
(called an issuer) for a specific financial function – whether
it be an ordinary (common stock) to provide ownership in
the corporation or a debt instrument (like a bond or other
fixed income device) to generate cash for specific projects or
needs. A security can be identified by the ISO standard 6166

International Security Identification Number (ISIN) and
comes in all forms – the ISO standard 10962 Classification
of Financial Instruments (CFI) provides a way of identifying
the type of a security.
Instrument (POL, POT, Market)
When an issuer creates a security, it is issued into a market
for trading and ownership by individuals and institutions
other than the issuer and then it becomes a tradable instru-
ment. If the market is organized, there may be requirements
that must be met – either in the volume of issuance, the
quality of the issuer, or registration of the security – which,
when satisfied and the “listing” is complete this market
becomes a Place of Listing (POL). Note that many markets
(exchanges) have arrangements with one another that allow
instruments that are listed in one market to be traded in
other markets without any action by the issuer – the latter
ARE NOT POLs but are simply recognized Places of Trade
(POTs) for that instrument.
POL, MLI, POQ, POT, MIC, IBEI, PSET, STP, SPA
The Place of Listing (POL) is the market into which an
issuer places an instrument for trading at which point it is
given a Market Level Identifier (MLI). The Place of Quote
(POQ) is the market (or venue) where the price of the offer
to buy or sell is communicated while the Place of Trade
(POT) is the market (or venue) where a trade match is exe-
cuted (note that POT and POQ are typically only differentiat-
ed by function). Generally, all of these “places” can be iden-
tified with the ISO 10383 Market Identification Code (MIC).
Systematic Internalisers are not an organized market and do
not have a MIC – when they need to be identified a
International Business Entity Identifier (IBEI) must be used.
Once a trade has been executed, it goes to a Place of
Settlement (PSET) for processing and final disposition of
funds and/or assets. The organization operating a PSET can
be identified with an IBEI as well – but may have a BIC. The
notion that trading through settlement should be an auto-
mated process – with reference data and information from
the deal provided – is known as Straight Through Processing
(STP). The broader concept, including automation for all
securities processing (i.e. creation, dissemination, mainte-
nance, trading, settlement, clearing) is known as Securities
Processing Automation (SPA).
MTF, ATS, ECN, SI,, RM
The MiFID documents present addition terms that are rel-
evant: A Multilateral Trading Facility (MTF) brings together
multiple third-party interests in financial instruments which
result in a contract (but is not an exchange). MTFs include
Alternative Trading System (ATS) and Electronic Crossing
Network (ECN) systems. A Systematic Internaliser (SI) in an
investment firm which, on an organised, frequent, and sys-
tematic basis, deals on its own account by executing client
orders outside a Regulated Market (RM) or MTF.
5.3 Background and UII Examples
The trading of securities in the mid 1960s demanded a
security identifier for each locally traded instrument result-
ing in the creation and issuance of local security identifiers
such as CUSIP, SEDOL, and VALOREN (U.S., U.K., and
Swiss markets respectively). Given the explosion in cross
border investment in both the developed and emerging
securities markets by the 1990s, more and more local identi-
fiers were issued by their respective national numbering
agencies. There are currently 66 national numbering agen-
cies issuing more than 20 different local codes.
The advancement of real time trading information and
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 63
Data Services Market Guide
technology platforms, not to mention the extending global
reach of many corporations and nations, has meant a sub-
stantial increase in cross border trading of multiple listed
securities – and the usage of “local” identifiers for identify-
ing instruments in other jurisdictions. As a result, different
types of identifiers are relevant at various levels for a variety
of functions within the financial instrument lifecycle.
The challenges associated with numbering schemes starts
by recognizing that financial institutions buy and sell a variety
of instruments that can be issued, priced, traded and settled
in many ways. The creation of the international standard ISIN
(ISO 6166), essentially an embedded local identifier with a
prefixed ISO country code, unified the format of a security
identifier and paved the way for the communication of elec-
tronic securities messages generated for trading, settlement,
and registration.
However, there are existing problems today when it comes
to trading and settlement reality, and these problems are
likely to intensify as European infrastructural barriers are
eliminated post-MiFID. In the trading environment, multi-
ple (predominantly vendor-specific) identification codes are
used that are easily interpreted by [usually] human traders.
In their own way, these vendor codes offer enough 'unique-
ness' although with the increasing occurrence of multiple
listings, the codes are no longer sufficient for processing a
transaction from trade through to settlement.
Additionally, in the settlement and reporting environment,
the ISIN (ISO 6166) code is insufficiently precise to offer
unique identification of an instrument for processing pur-
poses by machine. Although the identifier at the ISIN level
is a fungible instrument (as per the ISO rules for ISIN
assignment), offerings across multiple locations are not fully
transferable (e.g. clearing and settlement) for a variety of
reasons – introducing real issues of risk and valuation if
ISIN alone is used.
The following examples present various real-world (but
complex) securities that are relevant to the pan-European
and global markets. These examples illustrate why it is
important to identify an instrument unambiguously at each
stage in the trade processing lifecycle – from indicative
quote through indication of interest (IOI) and firm quote to
trade and settlement).
5.3.1 DaimlerChrysler
In this example (Figure 1 below), the common stock of
Daimler Chrysler is considered. The DaimlerChrysler exam-
ple is a good basic example because the corporation only
has one security for its common stock – identified by name
as “Daimler Chrysler AG” with an International Security
Identification Number (ISIN) of “DE0007100000” although
it trades on many markets in various forms.
5.4 Outline of Needs for UII
The critical requirement is to precisely identify the instru-
ment being traded (and quoted) as well as where it trades,
and to ensure that all instruments that are traded have an
instrument identifier that can meet the criteria of unambigu-
ity, timeliness, and commonality (non-discrimination).
Ideally, the identifiers used in reporting would make it easy
for market participants to identify which market provides
Best Execution.
Unambiguity (Uniqueness)
Within the securities industry, the required level of unique-
ness or unambiguity varies according to the user role. In the
Front Office, traders use a market ticker or proprietary vendor
code (like a RIC from Reuters or the Bloomberg ticker code)
 MiFID & Reference Data
as it is “human” friendly and specificity is usually provided in
context by the type of instrument the traders are discussing
(i.e. traders at the “Equity Desk” in a firm are unlikely to talk
about futures or a commodity). For Middle and Back Office
applications (i.e. post-execution), the preference is to use pre-
cise machine readable local codes such as ISIN, CUSIP, or
SEDOL to remove unnecessary ambiguity. In the majority of
the European equities domestic markets, perhaps ISIN + MIC
is sufficient to identify exactly which instrument is being trad-
ed (e.g. Germany and France). With International Central
Securities Depositories (ICSDs), such as Euroclear Bank or
Clearstream Banking, the use of ISIN alone may be sufficient.
But the point must be made; different functions within the life
of a security trade use different types of instrument identifiers.
The securities industry requires an instrument identifier
that is unambiguous (and ideally unique) at the POL level
and associated with all underlying Places of Trade. At this
level, one can build and cross reference multiple listed
instruments back to the root security. At present, the prefer-
ence to use different instrument identifiers at different
stages of a trade cycle within each firm highlights the diffi-
culty in cross referencing these identifiers between each
party of the trade. Any ambiguity or delay in identifying the
relevant instrument and security is a major contributor to
STP failure.
Timeliness and Coverage
As highlighted in the G30’s Second Report and in the
Second Giovannini Report, issued in January 2003 and April
2003 respectively, the lack of an efficient same day distribu-
tion mechanism of instrument identifier to securities issues
was originally seen as one of the key barriers preventing the
creation of an adequate clearing and settlement infrastruc-
ture in global financial markets. Practices were too slow and
sometimes resulted in the creation of “dummy codes” with-
in each institution’s securities master files. Dummy codes
were unique to the institution that created them and are
therefore not useful when exchanging information between
counterparties.
The extract from the CESAME minutes dated 7th March
2005 reported that “All ANNA members in the EU are now
issuing, on request, ISIN numbers on the same day. Although
members report slightly different practices within Members
States, they are generally satisfied with the service provided.
More information on details is given in the document per-
taining to the presentation. Barrier 8 is thus no longer per-
ceived as a major obstacle.”
At a practical level, the securities industry requires real time
allocation and intra-day distribution of new instrument identi-
fiers with appropriate cross-references for uniqueness and
unambiguity. New issue instrument identifier necessarily
should be allocated and distributed to the market participants
prior to trading. This trend will intensify post-MiFID with
greater volumes of both cash and (OTC) derivative trades
alone. The issuance of instrument identifiers therefore should
not be restricted to exchange traded instruments and should
be available to cover OTC, derivatives, and money market
instruments.
Commonality (Non-discrimination)
The securities industry requires the adoption of an instru-
ment identification scheme, either with a single identifier or
a list of identification components, by all securities partici-
pants. Although market data vendors and redistributors
offer cross-referenced security identifier lookup to their own
proprietary numbers, institutions still spend substantial
64 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
development and maintenance efforts to keep their own
master files up to date for resolving instrument identifier dif-
ferences both internally and externally with their counterpar-
ties or market data vendors.
The securities industry requires the adoption of an unam-
biguous (and ideally unique) instrument identifier by all
industry participants. The use of this common key should
enhance securities processing automation not just for trade
but also for entitlement, valuation, and reconciliation. It has
the side benefit of reducing both system and operation costs
of implementing alternate vendor data feeds thus encourag-
ing market data vendors to compete by breadth, depth, and
quality of coverage of their underlying asset data.
5.5 Potential UII Solutionss
Precise instrument identification is an absolute and funda-
mental requirement to meet the automation objectives asso-
ciated with securities processing automation. ISIN is a
unique fungible security identifier, but not always a unique
instrument identifier with respect to market practices. ISIN
alone is not sufficient for unique identification because one
ISIN can be shared among offerings in multiple locations
which vary by currency, lot size, and place of settlement
(amongst other parameters). As outlined in this paper, the
instrument identification scheme must meet the criteria of
unambiguity (precise security identification as well as identi-
fication of subordinate instruments with places of listing
and trade), timeliness (for master file set up and settlement
before trading can occur) and commonality (widespread
access and acceptance in a non-discriminatory fashion) in
order to be functional throughout the complete lifecycle of a
transaction.
The participants in the MiFID JWG Reference Data Subject
Group analyzed existing works, current practices, and
expected trends and identified four potential solutions for
instrument identification. The suggested solutions include:
i. Modifying ISO 6166 (ISIN) to have a different scope
and meaning
ii. Adding POL and (eligible) POT (as a MIC) to the data
provided with ISO 6166 (ISIN)
iii. Opting to use a vendor’s proprietary symbology
iv. ISIN should be augmented by MIC and a local market
identifier
5.5.1 Option 1: Modification of ISO 6166 (ISIN)
This suggestion involves modifying the scope and definition
of an ISIN, while using the existing 12 character code, to
define “securities” as a financial instrument at the Place of
Listing level (i.e. to identify each unique instrument). The
conclusion is that modification of the ISO 6166 (ISIN) is
neither reasonable nor viable because the existing ISIN is a
valuable standard for many applications. The following is a
summary of reasons why modification of ISIN is not appro-
priate:
a. ISIN (as a security level identifier) is a useful and valid
standard for middle to back office through to clearing
and settlement systems; as well as for aggregation of
global positions.
b. ISIN is currently used as a core identifier in many mas-
ter file systems. Modification of ISIN to a new level
would require re-mapping of multiple databases and
would have significant cost & coordination implications.
c. ISIN is assigned by national numbering agencies
(NNAs) or registration authorities and is based in some
cases on the local codes (if existing) of the local NNA.
Many of these NNAs fall outside the purview of MiFID.

d. It is also unlikely that all NNAs could offer real time
allocation & intra-day distribution of identifiers.
5.5.2 Option 2: ANNA Service Bureau (ASB)
– New POL + ISIN + MIC
This option requires that the ANNA Service Bureau (ASB)
modify the ISIN feed to include the Place of Listing as well
as MICs identifying the Place of Trade. The ANNA Service
Bureau (ASB) is prepared to add the requested information
to the ASB/ISIN files. Although not all numbering agencies
are able to neither provide nor maintain the additional data
elements, financial data providers do already have such data
in their products. Therefore, the requested information can
be obtained or otherwise provided by the ASB. Specifically
Telekurs, as one of the operators of the ASB, is prepared to
make such data elements available through the ASB provid-
ed the requestors indicate their intended usage and sub-
scription to the new service.
Some commentators posited that the ASB might be more
comfortable remaining focused on its core mission – i.e. the
collection, maintenance and dissemination of ISIN and CFIs
(Classification of Financial Instrument) data rather than
extending the mission of the ASB to allow them to collect
and provide additional data in response to marketplace
needs. Given the ASB service offering is still valid and avail-
able, it should be noted that the ASB remains responsive to
market needs in this respect.
As noted in Option 1, however, the core definition of an
ISIN still pertains to the security level rather than the instru-
ment level. This augmentation will provide additional infor-
mation to clarify the various incarnations of a security as an
instrument within a market but it will not solve all of the
core issues of identification.
5.5.3 Option 3: Vendor Propprietary Identifiers
Adopting the front office symbology of a market data ven-
dor (e.g. Reuters RIC code or Bloomberg Ticker) had been
discussed frequently as a potential solution to the chal-
lenges of precise instrument identification. Vendor symbol-
ogy holds the advantage of being preferred and used in the
front office. The majority of these identifiers (particularly for
equities) are created at the Place of Trade (POT) level.
The challenge would be for the global securities industry to
adopt one particular proprietary identifier and have the rest
of the market participants (including other vendors) gain
access through interoperable means and reference it in their
securities master file. Although vendor proprietary identifiers
may meet the unambiguity (and in some cases uniqueness)
as well as timeliness criteria, it is likely that competition and
commercial interests would be significant obstacles making
this option fail the commonality (non-discrimination)
requirement. However, this option could not be considered
as an industry-wide identification scheme in the short term
but with significant complications for migration to any other
long-term solution.
5.5.4 Option 4: NNA Local Codes Coupled with MICs
This option involves augmenting the NNA provided infor-
mation for a code with a MIC to identify the Place of Listing
and MIC(s) to identify the possible Places of Trade. The
London Stock Exchange (LSE) recently upgraded their numer-
ic SEDOL codes to offer timelier extensions featuring the
Place of Listing. This enhancement is believed to satisfy the
requirements for unambiguity, timeliness, and commonality.
Therefore, the coupling SEDOL + MIC meets the criteria for
instrument identification at the Place of Listing and Place of
Trade level and this method, if applied consistently across all
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 65
Data Services Market Guide
NNAs, is one viable option for industry-wide consideration.
5.6 Principal Recommenddations
The MiFID JWG RDSG proposes that ISO 6166 (ISIN –
International Security Identification Number) and ISO 10383
(MIC – Market Identification Code) should have a relation-
ship with a local market identifier (i.e. ticker code) as a
cross-reference in the local market. ISIN + MIC (as POT) is
fine for most cases.
However, there are situations, where ISIN + MIC (as POT)
+ Local Market Identifier Code will be needed to meet the
MiFID requirements. Individual firms should be allowed to
choose other solutions to perform the MiFID reporting.
Allowance should be made to address this in a modular
manner, supported by a market practice with regards to use.
ISIN + MIC (POT) will be needed by firms to justify Best
Execution under MiFID, and is also essential for record-
keeping (storage/retrieval of essential order and transaction-
al components). Lack of specifying the POT might make
data consolidation and reporting downstream that much
more difficult.
The rationale for the recommendation to use Place of
Trade (in lieu of Place of Listing) is that the POT is para-
mount in the identification of execution venues for Best
Execution, while Place of Listing (except for multi-listed
securities) is not as relevant, and there is a need to cross-
refer to market ticker codes. Additionally, firms usually have
their own cross-referencing, but there are open issues with
regards to entering market codes for orders and transactions
for trades executed on MTFs or executed OTC.
This approach needs to be qualified in relation to the fol-
lowing:
a. Ticker and either Place of Listing or (Place of
Trade/Quote) unambiguously cover the instrument pre-
and post- trade, but not necessarily uniquely, however.
There may be multiple ticker symbols on a single market
that map to the same ISIN (differences due to lot size
e.g. Singapore Telecom).
b. The MIC for Place of Trade/Quote covers the execu-
tion venue. However, a review of the ISO MICs will need
to be done to determine that all execution venues are
covered through perhaps getting them to sign the appro-
priate forms. A list of MICs is provided at the web-link:
http://www.iso15022.org/MIC/homepageMIC.htm.
c. There are still open issues concerning board lots and
exchange-traded derivatives particularly during times of
market stress e.g. triple-witching hour etc. A valid exam-
ple is required for clarity.
d. There are considerations with respect to the quotes
provided by Systematic Internalisers and the affect of the
Place of Settlement (PSET) on the quotes provided by
those institutions.
e. The challenge of processing securities where the ISINs
have yet to be assigned (where firms resort to allocating
“dummy ISINs”).
f. There is a need for a standard symbology for all trades
executed off-exchange/OTC.
g. As things stand, PSET carries the risk of ambiguity,
particularly if stocks are listed/quoted in multiple cen-
tres. Unambiguous instrument identification needs to
take account of this, and also account of the down-
stream Giovannini processes by way of constructive dia-
logue between the MiFID JWG and the Giovannini
Advisory Group.
 MiFID & Reference Data
It should also be noted that local reporting requirements are
sometimes defined to a very detailed level (e.g. dataset struc-
ture) by the local competent authority. This includes rules on
which instrument identifiers are accepted for reporting.
However, these rules often allow the choice between a variety
of identifiers. For instance, participants may identify instru-
ments by ISIN, SEDOL, and some other instrument identi-
fiers. It is believed that similar principles will apply when
member states adopt MiFID thus permitting some flexibility
by the reporting entity.
6 Identification of Markets
The need to identify markets is not a new thing – the ISO
10383 MIC (Market Identification Code) has been in active
use for about 5 years – having been developed in the late
1990s. The need to identify markets has existed for many
more years – but was only standardised
relatively recently. The ISO 10383 MIC is intended
for use in identifying markets and exchanges as the Place of
Listing as well as Place of Trade (and Quote). The ISO 10383
MIC currently identifies Regulated Markets
(RMs) as well as MTFs, ECNs, and ATSs. MiFID
creates a third category of markets, that of the Systematic
Internaliser (SI).
Markets – involved in the listing of instruments,
quotation of prices, and places of execution – need to
be identified under MiFID. MiFID makes specific
statements about reporting of firm quotes in a
continuous and timely fashion – not only for participants
within Regulated Markets but also from SIs.
The MiFID JWG RDSG proposes that the IBEI should be
used to identify the SI, with the SI role being a
qualifier to create the relevant context. However, there is a
discrepancy in the expected timing of a
comprehensive and usable IBEI vis-à-vis the
requirement for MiFID compliance in late 2007.
The ISO BIC code is a consideration as Systematic
Internalisers likely already have a BIC. There are issues with
the potential impact of non-unique multiple codes that
using the BIC might bring and an undermining of the case
for the IBEI (which is driven by other industry imperatives in
addition to MiFID).
The MiFID JWG RDSG thus proposes that further work
should be done to determine how this new market role may
be accommodated within the existing MIC structure, by
using the BIC code, or via a substitute (I)BEI facility on an
interim basis. Additionally, analysis should determine if
there is a need for an external facility to maintain and dis-
tribute market specific data relevant for MiFID and other
regulatory legislation.
7 Business Entity Identification
Reliable identifiers for business and legal entity
identification are essential across a wide range of
pre- and post- trade operational and regulatory processes –
for example, associated with activities such as due
diligence during client take-on, KYC (know your client) and
AML (anti-money laundering) compliance, legal agreements,
counterparty and credit risk management, and counterparty
identification for orders, trades,
settlement, and reporting.
The need to identify business and legal entities, and par-
ent/child hierarchies – is core to MiFID compliance, espe-
cially when it comes to fulfilling conduct of business obliga-
tions (art. 13), client agreements (art. 19), conflicts of inter-
est management (art. 18), price quotations (art 27), transac-
66 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
tion reporting and maintaining client records of orders and
trades (art. 40) for subsequent retrieval.
Historically, the question of entity identifiers had been
addressed before by ISO, SWIFT, GSTPA, Omgeo, CLS, and
others. In 2000, for example, SWIFT worked on a draft pro-
posal including the creation of new code to
identify business entities rather than using an envelope
mechanism for already existing national or international
identifiers as proposed in ISO 13735. In 2001, a proposal
was put before the SWIFT Board for SWIFT to act as the reg-
istration authority. The SWIFT Board re-examined the case
for basing the BEI on the BIC – the only problem was that
this solution had earlier been rejected by
SWIFT itself as likely to overwhelm the existing BIC scheme
capacity. However, the future expansion of BIC codes should
not be discounted as an open consideration should the
SWIFT community feels this to be expeditious.
These endeavours (and subsequently ISO) defined a
“Business Entity” as an entity that is either regulated or on
which due diligence is necessary under any
jurisdiction. Most recently, the RDUG Business Entity
Identifier Working Group was formed in early 2003 in order
to define, in agreement with other interested industry bod-
ies, a standard [set of processes] for
business entity identification that would support the institu-
tional securities processing chain from
relationship take-on, right through to the settlement
process. The work culminated in a White Paper
issued in July 2004.
The scope of RDUG’s work was limited to entities
comprising institutional securities market participants such
as broker dealers, clearers, custodians, investment man-
agers, CSDs, exchanges, industry utilities, charities, local
and national governments, supra-national bodies, and cor-
porate treasuries. Funds were recognised as additional busi-
ness entities needing standardised
identifiers. ISO’s current TC68/SC4 Working Group 8
(referred to as ‘ISO WG8’ in shorthand) was tasked in 2004,
defining the IBEI thus:
“IBEI is a global scheme for uniquely identifying
business entities playing a role in the lifecycle of, and events
related to, a financial instrument”.
ISO WG8 has published a standard entitled ISO 16372 in
two parts - a scheme for identifying business entities
through an International Business Entity Identifier code
scheme (ISO 16732-1) and proposed management
procedures for managing an IBEI database
(ISO 16372-2). As the generation and maintenance of IBEI
records involves several organizations (called Actors) coop-
erating with one another during the initial assignment as
well as long-term support of the IBEI
registration and publication infrastructure. The function
each Actor performs in the IBEI registration and
maintenance lifecycle is called a “Role”, and examples
include the Registration Authority, Trusted Source, Sponsor,
and Subscriber.
ISO 16732 proposes a code structure and a set of
criteria such as a centralised database, but no
requirement for parent-child relationships, which
potentially simplifies the creation of the identifier and its
resultant database. The open issues seem to be who should
be the registration authority and how will the facility be
funded. It is expected that WG8 will produce the IBEI stan-
dards by early 2007, which may

(unfortunately) be too late for MiFID and a number of other
regulatory and institutional requirements.
In 2005, the RDUG BEI WG and the ISITC Reference Data
SIG joined forces to facilitate interim tactical
solutions for the industry until the ISO standard becomes
available for implementation. This became formalised as
the IRBI Project (ISITC-RDUG BEI Initiative), working to
coordinate and facilitate both the emerging BEI business
requirements and vendors’ plans to meet these.
7.1 Critical Requirements for Entity Identifiers
The identifier adopted needs to be able to support three
main areas of activity:
i Compliance with MiFID and other regulatory laws –
unambiguous identification of all parties within the regu-
lated processes;
ii Compliance and Identification – this includes “Know
Your Customer” (KYC), Anti-Money Laundering (AML),
and associated due diligence
procedures that are required by law.
iii Trade processing - pre-trade through to settlement.
When searching through the data sources available to cross-
reference information on an entity, it soon becomes clear
that there is little consistency in the use of identifiers.
Moreover, where sources are sparse or do not reflect recent
changes, it is often all too easy to misapply information to
the wrong entity at the wrong address. Once again, brokers
dealing with hedge funds, unregulated entities or entities in
offshore jurisdictions are most at risk of getting things
wrong.
The Capital Requirements Directive (Basel II accord) and the
recommendations within the G30’s ‘Global Clearing and
Settlement, a Plan of Action’ on operational risk have impli-
cations for entity identifiers too. A key
requirement is the ability to group entities together easily in
order to assess operational risk exposure towards organisa-
tions composed of multiple legal and business entities.
Another area of interest to risk and credit
managers is the ability to link securities on their Master
Files to the issuers and guarantors of those securities. One
of the keys to the success of this new business entity identi-
fier therefore will be the acceptance of the identifier by regu-
lators and by CESR. It is likely that these bodies will wel-
come a global standard for identifying their
member entities that does not conflict with existing i
dentifiers.
7.2 Definition and Specification of Entity Identifiers
The original RDUG Entity Work Group proposal, dating
back to 2003, was to use the actual BIC code of the
business/legal entity and link it to some kind of fund identi-
fier. The only problem with this was the lack of a one-to-one
relationship between entities and their BICs: some firms use
one BIC to cover multiple entities and others assign more
than one BIC to the same entity. Much of the subsequent
basis of RDUG’s White Paper of July 2004 proposal comes
from work done by RDUG, REDAC, and ISO WG8, and
focused on the definition of the structure of the identifier
and the supporting processes for creating and maintaining
the identifier and related data.
It is important to realise that the proposed identifier con-
tains no intelligence or information within it other than the
country of registration of the entity (and a check digit). The
simple table below diagrams the prevailing suggestion for
the IBEI format, giving rise to 21.87 billion possible combi-
nations per country of registration (more than adequate for
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 67
Data Services Market Guide
this purpose).
Relationships between institutional business entities and
the funds they manage, and between institutional parents
and their subsidiaries and affiliates can be very complex. For
example, the diagram in Fig 3 shows a
simplified example data structure for an investment
manager. That said, the structure of the first 3 levels – par-
ent, subsidiary and business/legal entity – could also apply
to any type of market participant.
How the identifier is used to create data structures and
hierarchies will be largely up to the consumers of the data
and is anticipated to be a commercial issue. Some of this
information could prove useful for
MiFID, especially in the realm of price sourcing and client
classification.
7.3 Operational Issues and Conclusions
Two possible models identified for the repository structure.
The centralised model
∑ The decentralissed models
Both the RDUG group and WG8 rejected the
decentralised model and made a positive recognition of mul-
tiple (decentralised) commercial models. In the
centralised model, applicants either approach the IBEI facili-
ty directly (if a regulated financial institution, for example)
or via a sponsor.
ISO WG8 has preferred the sponsor model rather than
allowing applicants direct contact with the central
facility/registration authority.
The RDUG Entity WG White Paper of July 2004 also
described in considerable detail how a future registration
authority/central facility would manage the key processes
involved in IBEI administration. For the initial
application, these functions included:
i. Creation of a new identifier
ii. Updating an existing identifier
iii Third Party Notification of Change and Response
iv Twilighting*
(*, the concept of Twilighting is introduced to ensure
that data does not become stale and to encourage IBEI
owners and sponsors to inform the operator of changes.
Each IBEI will have a given ‘shelf-life’ and will require
refreshing by the owner or sponsor at pre-determined
intervals. Warnings that data or documentation is com-
ing to the end of its shelf-life will be automatically broad-
cast to those charged with updating it. Failure to do so
will lead to an IBEI becoming restricted.)
The reader is referred to the “RDUG Legal Entity
Identifiers White Paper” or the “IRBI Vendor Event
Requirements Overview” documents on the ISITC
website for further details concerning the process flows
which are covered by these functions as compiled by Simon
Leighton-Porter. Subsequent work by IRBI has shown that
while the best solution is based on a single global IBEI facili-
ty allocating and managing identifiers, a solution based
around multiple competitive commercial facilities is feasible,
provided the interoperability issues can be resolved.
7.5 PRINCIPAL RECOMMENDATIONS
BUSINESS ENTITY DATA STANDARD
A business entity data standard needs to be made available
sufficiently in advance of the 01 November 2007 in view of
the deadline for compliance with the provisions of MiFID,
particularly with regards to article 19. If these
standards are not agreed across the industry in time, they
 MiFID & Reference Data

may come too late to help firms implementing MiFID and dard. The MiFID JWG RDSG has noted that there is a need
there could be a need for interim solutions with upward to ensure that the IRBI and IBEI processes will be made con-
compatibility to the eventual standard from ISO WG8. gruent for this purpose.
KYC & AML PROGRAMS
The key driver is not just MiFID but related regulations WAYS FORWARD
such as KYC and AML programs which call benefit from The third party solutions described above provide (or will
common approaches and natural hierarchies with business provide) their own unique range of interim Business Entity
& legal identifiers. There is also need to link counterparty Identifiers, which will operate in parallel with the evolving
codes with risk people for reasons of managing risk under ISO WG8 standard and will need to be mapped to through
CRD II (Basel II) & a need to address the issue of making the cross referencing capability within a future IBEI Facility.
hierarchies available, whether centrally or commercially. One or more of these service suppliers, with their already
ISO WG8 existing large pools of business entity data, could act as
ISO WG8 have recommended a code structure without any operators of the BEI or IBEI Facilities.
embedded hierarchy via a set of criteria such as centralised ISJ
database, no requirement for parent-child relationships,
sponsorship etc. The advantage of their approach is that it
could potentially simplify the creation of the identifier and HELP! The Abbreviations
its resultant database. The key issues seem to be who (see previous sections for discussion of definitions):
should be the registration authority and how will the facility ISIN The ISO 6166 International Security
be funded. The concept of cross-referencing has not yet Identification Number
been agreed by ISO WG8 as they have felt that this is an MIC The ISO 10383 Market Identification
activity better suited to the commercial space. Code
BUSINESS ENTITY IDENTIFIER (BEI)
The recent work done by the MiFID JWG RDSG recognises POL Place of Listing identified using the ISO
the clear industry need for an identifier that supports client MIC
take-on and trade processing as well as their associated POT Place of Trade identified using the ISO
compliance requirements such as KYC and AML programs. MIC
The RDSG supports and welcomes the prospect of a MLI Market Level Identifier (i.e. exchange
Business Entity Identifier (BEI) becoming an International ticker used by front-office)
Business Entity Identifier (IBEI), the ISO identifier overseen
by an appointed registration authority. The RDSG recognis- ISO 10383 MARKET IDENTIFICATION CODES - MICS
es the need for a central facility to administer the issuance
of and updates to BEIs. This need not be operated by the (see http://www.iso15022.org/
registration authority. The RDSG also posits the notion of for full list):
“sponsor” organisations who might choose to stand XAMS Euronext Amsterdam
between the (I)BEI facility and applicants for new (I)BEIs. XBDA Bermuda Stock Exchange Ltd, The
There are clearly open issues to be resolved when it comes XBER Berliner Wertpapierboerse (Berlin)
to embedding information inside the identifier. A major part XBOS Boston Stock Exchange
of the value of a BEI comes from its ability to cross-reference XBRE Bremer Wertpapierboerse (Bremen)
to existing identifiers, yet the question of where the cross- XCIS National Stock Exchange (Cincinnati)
referencing might take place remains open. What is clear is
that users of the data are free to use BEIs as building blocks XCHI Chicago Stock Exchange, Inc.
for creating their own data hierarchies within their own XDUS Rheinische-Westfaelische Boerse Zu
organisations. Thus the compromise solution might be that Duesseldorf (Dusseldorf)
only the core BEI data will be available as the ISO standard XETR Deutscher Kassenverein AG Gruppe
and priced at a cost-recovery basis. Value-added data deriv- Deutsche Boerse (Xetra)
ing from cross-references to existing data sources, compari- XFRA Deutsche Boerse AG (Frankfurt)
son of multiple data sourcing, regulatory broadcasts or pos- XHAM Hanseatische Wertpapierboerse Hamburg
sible links to corporate actions could be subject to commer- XHAN Niedersaechsische Boerse Zu Hannover
cial pricing. Further debates at the IRBI level is needed in
order to explore these issues in greater detail and to help (Hanover)
ensure convergence with the WG8 processes. XLON London Stock Exchange, The
REGISTRATION AUTHORITY XMUN Bayerische Boerse (Munich)
SWIFT could be considered as one of the logical candidate XNYS New York Stock Exchange, Inc.
for the Registration Authority; the database could be run by XOTC OTC Bulletin Board
a combination of market facilitators. The costs of set-up XPAR Euronext Paris S.A.
could be recouped through value-added services. An out- XPHL Philadelphia Stock Exchange
come of the IRBI process on June 7th 2005 resulted in pre- XPSE Pacific Exchange
sentations by interested suppliers (in alphabetical order)
Accenture/Asset Control, AZDEX, Cicada/CPL, Coexis, Dun XSTU Beden-Wuerttembergische
& Bradstreet, Oracle, and S&P of their current and planned Wertpaiperboerse Zu Stuttgart
products and services in the business entity data manage- XSWX Swiss Exchange
ment area. The IRBI process is a positive indication that XTKS Tokyo Stock Exchange
these entities would express a wish to abide by a given stan- XVTX Virt-X

68 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007

 Banking

CapitalMarket
Capital Market
asset management

SmartCo: Asset Trading

Software solutions
for the Finance
Industry
SmartCo solutions:
A concrete view of the business

Smart Financial Data Hub (SFDH) is a global data
management solution that covers most of the data area,
including market data, corporate actions, indexes
and benchmarks, third parties, funds and mandates,
financial analysis, etc., as well as operational data
with positions and transactions.
SFDH provides a very rich set of Data Management
functionnalities :
• a full connectivity support with multiple protocols,
data transformation and mapping, and APIs,
• a customisable, powerful and user-friendly
front-end,
• quality controls and data enrichment,
• customisable workflow and business logic,
• full audit trail and permissioning,
• documents management,
• a robust and scalable multi-tiered architecture
for massive volumes,
• support for most systems and RDBMS.
The solution is provided with data models based
on 15 years of best practices and designed to meet
the requirements of the most demanding users
and clients.
SmartCo also offers Smart Asset Management Suite, a
complete and modular suite of modules designed for as-
set management companies, including Portfolio Analysis,
Rebalancing and Simulation, Trade Management, Position
Keeping, Order Management and Trading modules.
These solutions use the SmartPlanet technology,
an urbanisation software infrastructure for faster design
and deployment of flexible, sustainable and upgradeable
solutions. SmartPlanet is an innovative, scalable
technology that covers the key areas of urbanisation -
Enterprise Data Management, Business Process
Management and Business Intelligence. SmartPlanet
guarantees the flexibility of your solutions for today
and tomorrow. It provides you with a tremendous time to
market in your business solutions.
SmartCo, founded in 2004 by financial software
and consulting professionals working in finance,
is a software provider specialising in solutions
for the financial industry.
Smartco
55, rue Saint-Anne
75002 Paris.
T - +33 (0)1 40 82 79 01
F - +33 (0)1 45 26 68 84
info@smartco.fr

www.smartco.fr
 Data Services GLOSSARY
ANNA: Association of National
Numbering Agencies scrl.
(www.anna-web.com).
ASCII: American Standard Code for
Information Interchange. It is a
standard for the code numbers
used by computers to represent all
the upper and lower-case Latin let-
ters, numbers, punctuation, etc.
BEI: Business Identifier Code. One
should note that there are two
BEIs:
• SWIFT maintains a BEI which is
constructed the same way as the
BIC but is available for non-finan-
cial entities only.
• FIX is currently supporting work
of industry groups such as the
Reference Data User Group (RDUG)
on the development of an alterna-
tive BEI.
BIC: Bank Identifier Code (ISO
9362).
Branch: MiFID definition, Art. (26):
communicate
A place of business other than the
head office which is a part of an
investment firm, which has no
legal personality and which pro-
vides investment services and/or
activities and which may also per-
form ancillary services for which
the investment firm has been
authorised.
Competent authorities (CA): MiFID
definition, Art. 4 (22). The authori-
ty, designated by each Member
State in accordance with Article
48, unless otherwise specified in
the MiFID. They should be further
distinguished into:
• CA of the most relevant market
in terms of liquidity (CAL): The
competent authority of the most
relevant market in terms of liquidi-
ty (as proposed in CESR’s
Technical Advice, the CAL is deter-
mined by the use of a proxy
approach supplemented where
necessary by quantitative compu-
tation and a revision procedure);
• CA of the trading venue on
which the transaction took place
(CATV): The competent authority of
the trading venue where the trans-
action took place or, if the trade
took place out-side of a trading
venue, the member state(s) of the
investment firms who participated
in the transaction;
• Home CA: The competent author-
ity of the home Member State of
the investment firm (MiFID defini-
tion, Art. 4 (20a));
• Host CA: The competent authori-
ty of the Member State where the
branch of the investment firm is
located (MiFID definition, Art. 4
70 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
(21));
• Receiving competent authority
(receiving CA): The competent
authority receiving a forwarded or
routed report in the harmonised
format of transaction transaction
data (i.e. information processed to
be exchanged between competent
authorities).
• Sending competent authority
(sending CA): The competent
authority to which the investment
firm has an obligation to report
and to which transaction reports
are due by the reporting party, in
order to comply with the MiFID
reporting requirements.
Financial instruments: MiFID defi-
nition, Annex 1, Section C.
(1) Transferable securities;
(2) Money-market instruments;
(3) Units in collective investment
undertakings;
(4) Options, futures, swaps, for-
ward rate agreements and any
other derivative contracts relating
to securities, currencies, interest
rates or yields, or other derivatives
instruments, financial indices or
financial measures which may be
settled physically
or in cash;
(5) Options, futures, swaps, for-
ward rate agreements and any
other derivative contracts relating
to commodities that must be set-
tled in cash or may be settled in
cash at the option of one of the
parties (otherwise than by reason
of a default or other termination
event);
6) Options, futures, swaps, and
any other derivative contract relat-
ing to commodities that can be
physically settled provided that
they are traded on a regulated
market and/or an MTF;
(7) Options, futures, swaps, for-
wards and any other derivative
contracts relating to commodities,
that can be physically settled;
(8) Derivative instruments for the
transfer of credit risk;
(9) Financial contracts for differ-
ences;
(10) Options, futures, swaps, for-
ward rate agreements and any
other derivative contracts relating
to climatic variables, freight rates,
emission allowances or inflation
rates or other official economic
statistics that must be settled in
cash or may be settled in cash at
the option of one of the parties
(otherwise than by reason of a
default or other termination event).
FIX: Financial Information
eXchange Protocol. FIX is a mes-
saging standard developed specif-
ically for the real-time electronic
exchange of securities transac-
tions. FIX is a publicdomain speci-
fication owned and maintained by
FIX Protocol, Ltd. (www.fixproto-
col.org).
Internalisers or systematic inter-
naliser: MiFID definition, Art. 4 (7):
An investment firm which, on an
organised, frequent and systemat-
ic basis, deals on own account by
executing client orders outside a
regulated market or an MTF.
Investment firm: MiFID definition,
Art. 4 (1): Investment firm means
any legal person whose regular
occupation or business is the pro-
vision of one or more investment
services to third parties and/or the
performance of one or more invest-
ment activities on a professional
basis.
ISIN: International Securities
Identification Number (ISO 6166).
ISMA: International Securities
Markets Association. ISMA is a
self-regulatory organisation and
trade association for the interna-
tional securities market
(www.isma.org).
ISO: International Organization for
Standardization (www.iso.org).
Member State (MS): MiFID defini-
tion, Art. 4 (20) and (21), respec-
tively.
• Home Member State means:
(a) In the case of investment
firms: (i) if the investment firm is
a natural person, the Member
State in which its head office is
situated; (ii) if the investment firm
is a legal person, the Member
State in which its registered office
is situated; (iii) if the investment
firm has, under its national law,
no registered office, the Member
State in which its head office is
situated;
(b) in the case of a regulated mar-
ket, the Member State in which the
regulated market is registered or,
if under the law of that Member
State it has no registered office,
the Member State in which the
head office of the regulated mar-
ket is situated.
• Host Member State means the
Member State, other than the
home Member State, in which an
investment firm has a branch or
performs services and/or activities.
MIC: Market Identifier Code (ISO
103383).
MiFID: Directive 2004/39/EC of the
European Parliament and of the
Council of 21 April 2004 on mar-
kets in financial instruments
(amending Council Directives
85/611/EEC and 93/6/EEC and
Directive 2000/12/EC of the
European Parliament and of the
Council and repealing Council
Directive 93/22/EEC).
Multilateral Trading Facility
(MTF): MiFID definition, Art. 4 (15):
Means a multilateral system, oper-
ated by an investment firm or a
market operator, which brings
together multiple third party buy-
ing and selling interests in finan-
cial instruments.
Regulated Market: MiFID defini-
tion, Art. 4 (14): A multilateral sys-
tem operated and/or managed by a
market operator, which brings
together or facilitates the bringing
together of multiple third-party
buying and selling interests in
financial instruments.
Reporting Party: The reporting
party is either the investment firm
or any approved reporting chan-
nels doing so on its behalf, send-
ing the transaction reports to a
competent authority, to comply
with the MiFID requirements on
transaction reporting.
SFTF : Store and forward transfer
facility.
SWIFT: Society for Worldwide
Interbank Financial
Telecommunication. SWIFT is a
financial industry-owned co-opera-
tive supplying secure, standard-
ised messaging services and inter-
face software to a huge number of
financial institutions
(www.swift.com).
Technical Advice: CESR’s
Technical Advice on Possible
Implementing Measures of the
Directive 2004/39/EC on Markets
in Financial Instruments dated
January 2005 (CESR/05- 024c).
Transaction Data: It refers to the
information processed “into the
harmonised format of transaction
reports to be exchanged between
competent authorities”.
Transaction Report: A report that
has to be sent to the relevant com-
petent authority in compliance
with the reporting requirements of
Article 25 of the MiFID.
XML: eXtensible Markup Language.
XML provides a flexible way to cre-
ate standard information formats
and share both the format and the
data on the World Wide Web.
Source: MiFID JWG
 Data Services Market Guide

David Hirschfeld

COMPANY BRIEF:

Asset Control is the market leading provider of Whatever the challenge - Basel II, market risk,
Centralized Data Management (CDM) solutions STP, trading support, portfolio management,
to Tier one and Tier two buy and sell-side firms, corporate actions or research – everyday
and market infrastructure companies around thousands of users worldwide depend on Asset
the globe. We offer flexible and reliable software Control to meet these challenges, achieve the
solutions to resolve the investment data man- greatest levels of efficiencies while reducing
agement challenges of our customers. Our tech- risk – all at the lowest total cost of ownership.
nology supports the entire lifecycle of data man-
agement including sourcing, cleansing, enrich-
ment, storage, distribution, applications and
research services used today to support applica-
tions in front, middle and back office environ-
ments, as well as for infrastructure optimization
in support of enterprise initiatives such as risk,
compliance and STP. Only Asset Control deliv-
ers a complete enterprise-wide data integration
solution, as well as a hybrid approach to data
management that blends in-house software with
outsourced services. With our off-the-shelf soft-
ware solutions, we ensure the quickest time
to production for a maximum return on
investment.

KEY LOCATIONS: KEY CONTACTS:

54 Lombard Street, London, Pascal Guignabaudet

EC3P 3AH, UK pascalg@asset-control.com
W: www.asset-control.com T: +44 (0)20 7743 0320
F: +44 (0)20 7743 0321

DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 71

 Service Provider - PROFILES
Christoph Lammersdorf
COMPANY BRIEF:
CounterpartyLink was founded in 2005 in direct
response to the market’s requirement to have
access to a single, maintained database of accu-
rate and auditable company reference data from
around the world. The company is focussed on
providing such information to the stringent quali-
ty and accuracy levels required by current KYC,
MiFID, The EU Third Money Laundering
Directive and other regulations in the financial
markets. These levels not only require all infor-
mation to be gathered from regulated or autho-
rised sources, such as national company reg-
istries and regulators, but also to be rigorously
maintained to reflect every corporate action that
might affect the data stored on any given entity.
With multi-language capabilities and internation-
al operation centres CounterpartyLink has estab-
lished the expertise and processes required to
source, maintain and distribute legal entity refer-
ence data as well as full audit trails and source
document copies from over 160 jurisdictions to
its international client base.
CounterpartyLink’s mission is therefore to
reduce the burden of collecting and maintaining
compliant legal entity data, by providing accurate
and auditable global information from primary
sources, and maintaining it through efficient,
documented processes.
KEY LOCATIONS:
London (HQ): +44 20 7645 8352
New York: +1 212 672 1717
W: www.counterpartylink.com
72 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
Christoph Lammersdorf, Managing Director,
CounterpartyLink.
Christoph Lammersdorf joined CounterpartyLink in
February 2005 as Managing Director, responsible for
the company’s strategy, business development efforts
and overall operations. An experienced financial
data and technology executive, he has previously
served as Member of the Executive Board of
Deutsche Börse AG and Managing Director of its
Information Services division.
KEY SERVICES:
CounterpartyLink provides up to 94 fields of
data for every entity subscribed to by its clients.
Company information collected includes name
histories, addresses, corporate hierarchies, reg-
istration and regulation authorities and IDs,
incorporation details, SWIFT BIC codes, other
identifiers and much more. Electronic copies
are kept of all source documentation used.
There are 3 main product lines as follows:
CounterpartyLink Entity Check allows you to val-
idate your existing entity data (counterparties,
clients, issuers and obligors) against the
CounterpartyLink database. CounterpartyLink
Entity Data provides you with the full
CounterpartyLink data set for each entity you
request. CounterpartyLink Entity View is an
online service accessed through the
CounterpartyLink website.
KEY CONTACTS:
Martin Cole, Head of Sales
Martin.cole@counterpartylink.com
T: +44 20 7645 8262

Steve Cheng
COMPANY BRIEF:
DST International Limited, a global company of
1500 professionals in 19 offices worldwide, spe-
cialises in the provision of innovative software
solutions and services to 700 clients in 55 coun-
tries.
DSTi focuses on four key business streams;
Investment Management systems for institu-
tional portfolio managers and wealth managers,
Business Process Management solutions to
provide a platform for continuous improve-
ment, Utility Billing to deliver an unrivalled level
of customer service and Document
Management solutions that utilise sophisticated
print technology.
With over 25 years of experience of providing
solutions to the global investment management
community, we at DSTi understand the busi-
ness challenges being faced today by our
clients. The data management solutions we pro-
vide are built on our extensive knowledge of the
way that investment and market data is used
across the asset management business. By
making use of our data management software
within our own front, middle and back office
applications, we can offer a proven platform on
which to conduct your investment management
business.
KEY CONTACTS:
Steve Cheng
W: www.dstinternational.com
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 73
Data Services Market Guide
Steve Cheng, Head of Investment Data Solutions,
DST International.
Steve Cheng is head of product management for
DSTi’s Investment Data Solutions. He has spent
the majority of his career in the financial informa-
tion and software industry in a number of senior
international product marketing positions at
Reuters and Datastream.
KEY SERVICES:
DSTi’s Investment Data Solutions comprise
innovative software and services to manage the
challenge of organising your data Our approach
offers a unified solution that focuses on all
aspects of investment data management rang-
ing from the Investment DataWarehouse at the
heart of the solution through to end-to-end data
management functionality. This includes such
features as the collection and verification of
transactional and positional data and market
and reference data, prior to storing within our
robust investment centric data model, to mar-
ket leading business process management
capabilities, real-time position maintenance and
portfolio valuation functions. Given our back-
ground in providing solutions for investment
accounting and middle office applications it
should not be surprising that our data manage-
ment software should strive to solve the busi-
ness problems posed in these areas rather than
just provide a technology platform. For those
organisations looking to consolidate numerous
sources of internal and external investment data
into a centrally controlled location to enable
complex reporting, performance measurement
or risk management then DSTi’s Investment
Data Solutions offers a proven platform to pro-
vide that capability.
 Service Provider - PROFILES

Susan Spivey

COMPANY BRIEF: KEY SERVICES:

The Depository Trust & Clearing Corporation Clearing and settlement (cash markets for equi-
(DTCC), through its subsidiaries, provides clear- ties, fixed income, money market instruments),
ance, settlement and information services for Custody and asset servicing for $30 trillion
equities, corporate and municipal bonds, gov- assets held in custody, Distribution services and
ernment and mortgage-backed securities, money settlement for mutual funds and insur-
money market instruments and over-the-count- ance, OTC derivatives matching and confirma-
er derivatives transactions. DTCC provides cus- tion and payment services (credit default swaps,
tody and asset servicing for more than two mil- interest rate derivatives, equity derivatives),
lion securities issues from the United States Information services, including global corporate
and 100 other countries and territories. In addi- actions information and Global tax services
tion, DTCC is a leading processor of mutual
funds and insurance transactions, linking funds
and carriers with their distribution networks.
DTCC was established in 1999 as a holding
company for a group of operating companies
providing securities clearance, settlement, cus-
tody and information services. Several of our
companies have been serving the financial serv-
ices industry for three decades. Others were set
up more recently to serve new customer groups
or meet the changing needs of capital markets
throughout the world. DTCC has operating
facilities in multiple locations in the United
States and overseas.

Susan Spivey, Senior Sales Director,

Global Corporate Actions, DTCC.

KEY LOCATIONS: KEY CONTACTS:

New York: +1 212 855 1000 London: Richard Bustard

London: +44 207 444 0417 rbustard@dtcc.com
Shanghai: +86 21 3220 4710 T: +44 (0)20 7650 1501

74 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007


Chris Madigan
COMPANY BRIEF:
Leveraging over 10 years of experience, Fidelity
ActionsXchange is the premier provider of glob-
al corporate actions processing solutions for
many of the world’s top Asset Managers, Banks,
Hedge Funds and Broker-Dealers.
Developed by Fidelity Investments,
ActionsXchange offers a new model for manag-
ing and acting on critical corporate action infor-
mation that significantly reduces risk, broadens
coverage and improves accuracy. Our innovative
solution leverages multiple best-of-breed com-
mercial data feeds and other direct data
sources, along with rigorous analysis and sup-
port, to turn even the most complex data into
intelligence our clients can use to make confi-
dent business decisions.
No other vendor provides the comprehensive
information coverage or processing solutions of
ActionsXchange.
Chris Madigan, Vice President,
Global Sales and Marketing,
Fidelity ActionsXchange.
KEY LOCATIONS:
Fidelity ActionsXchange
82 Devonshire Street, G4B
Boston, MA 02109
W: www.actionsxchange.com
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 75
Data Services Market Guide
KEY SERVICES & PRODUCTS:
ActionService uses multiple commercial data
sources, highly skilled analysts, and leading-
edge technology to edit, synthesize, cleanse,
and reformat corporate actions announcements
into a single composite record. As an independ-
ent resource—and not a proprietary data ven-
dor—we can objectively decide which data serv-
ices meet our “best of breed” information crite-
ria. ActionService clients can access their con-
solidated data through a variety of outputs
including a user-friendly Web interface support-
ing real-time access to corporate action intelli-
gence.
ActionCompare, our newest product offering, is
a unique service that provides financial institu-
tions with greater options for managing the
cost, risk, and information conflicts associated
with corporate actions discrepancies. This
Application Service Provider (ASP) model com-
pares ActionService corporate action data with a
client’s custodian or proprietary data, producing
a composite client summary record customized
to each client’s attributes and parameters. With
a single platform for data input and compari-
son, companies can easily identify and address
incomplete or conflicting information.
KEY CONTACTS:
T: 877.777.5838
F: 617.476.0362
E: ActionsXchange@Fidelity.com
 Service Provider - PROFILES
Nat Sey
COMPANY BRIEF:
Providing global reach backed by local expertise,
Interactive Data delivers essential market data
and analytics, helping to address the challenges
of the international financial industry, whether
end-of-day, intra-day or real-time.
Interactive Data Corporation (NYSE: IDC) is a
leading global provider of financial market data,
analytics and related services to financial insti-
tutions, active traders and individual investors.
The company’s businesses supply time-sensi-
tive pricing, evaluations and reference data for
more than 3.5 million securities traded around
the world, including hard-to-value instruments.
Many of the world's best-known financial
service and software companies subscribe to
the Interactive Data's services in support of
their trading, analysis, portfolio management
and valuation activities. Clients include leading
banks, brokerage firms, insurance firms, money
management firms, government agencies, stock
exchanges, custodians, fund managers and
hedge funds worldwide.
Nat Sey is Reference Data Business Manager,
Interactive Data (Europe).
KEY LOCATIONS:
Europe: Cologne, Dublin, Frankfurt, Geneva,
Glasgow, Helsinki, Jersey CI, London,
Luxembourg, Madrid, Milan, Paris, Zürich
USA: Bedford, MA (Corporate HQ), Boston,
Chicago, Houston, Los Angeles, Miami, New
York, San Francisco
Asia Pacific: Hong Kong, Melbourne, Singapore,
Sydney, Tokyo
76 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
Nat Sey is Reference Data Business Manager,
Interactive Data (Europe). Mr Sey is a member of
ISITC Europe, the Reference Data User Group
(RDUG) and its corporate actions working group.
He is also Interactive Data's representative and co-
chair of the Market Data Provider User Group
(MDPUG) as well as one of the representatives on
the MiFID Joint Working Group.
KEY SERVICES:
Through its businesses, Interactive Data’s serv-
ices include:
- High quality historical, end-of-day and intra-
day pricing and reference data
- Independent daily evaluations for c. 2.5 million
fixed income and international equity issues
- Groundbreaking Fair Value Information Service
- Real-time global market data and customised
managed solutions
- Fixed income portfolio analytics
- Streaming real-time market data and decision
support tools for financial professional and
active investors from eSignal
KEY CONTACTS:
Nat Sey
nat.sey@interactivedata.com
T: +44 (0)20 7825 8000
W: www.interactivedata.com
 Service Provider - PROFILES
Pascal Mougin
COMPANY BRIEF:
Founded in 2004 by software providers and
consulting professionals working in finance,
SmartCo is a software publisher specialising in
solutions for the financial sector.
The SmartCo offer includes a centralised data
management solution, Smart Financial Data
Hub, and Smart Asset Management Suite, a
suite of functional modules designed for asset
management companies. These solutions use
SmartPlanet technology, an urbanisation soft-
ware infrastructure for faster design and
deployment of durable, upgradeable solutions.
SmartPlanet is an innovative, scalable technol-
ogy that covers the key areas of urbanisation -
Enterprise Data Management, Business
Process Management and Business
Intelligence.
Pascal Mougin, President and Co-founder
SmatCo.
KEY SERVICES & PRODUCTS:
Smart Financial Data Hub (SFDH) is a global
data management solution that covers most of
KEY LOCATIONS:
SmartCo
55 rue Sainte Anne
75002 Paris
T: + 33 (0)1 40 82 79 01
F: + 33 (0)1 45 26 68 84
E: info@smartco.fr
W: www.smartco.fr
78 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
the data area, including market data, corporate
actions, indexes and benchmarks, third parties,
funds and mandates, financial analysis, etc., as
well as operational data for positions and trans-
actions. SFDH provides a very rich set of Data
Management functionnalities :
- a full connectivity support with multiple proto-
cols, data transformation and mapping, and
APIs,
- a customisable, powerful and user-friendly
front-end,
- quality controls and data enrichment,
- customisable workflow and business logic,
- full audit trail and permissioning,
- documents management,
- a robust and scalable multi-tiered architecture
for massive volumes,
- support for many systems and RDBMS.
SmartCo also offers Smart Asset Management
Suite, a complete and modular suite of modules
designed for asset management companies,
including Portfolio Analysis, Rebalancing and
Simulation, Trade Management, Position
Keeping, Order Management and Trading mod-
ules.
These solutions use SmartPlanet technology,
an urbanisation software infrastructure for
faster design and deployment of flexible, sus-
tainable and upgradeable solutions.
SmartPlanet is an innovative, scalable technolo-
gy that covers the key areas of urbanisation -
Enterprise Data Management, Business Process
Management and Business Intelligence.
SmartPlanet guarantees the flexibility of your
solutions for today and tomorrow.
KEY CONTACTS:
Pascal Mougin, President and Co-founder
Jean-Baptiste Le Dantec, Sales Manager

Janet Crowley
COMPANY BRIEF:
With annual revenue of $4 billion, SunGard is a
global leader in software and processing solu-
tions for financial services, higher education
and the public sector. SunGard also helps infor-
mation-dependent enterprises of all types to
ensure the continuity of their business.
SunGard serves more than 25,000 customers in
more than 50 countries, including the world’s
50 largest financial services companies.
Janet K. Crowley, President,
Data Management Solutions,SunGard.
Janet Crowley is president of SunGard’s data man-
agement solutions business. She has more than 16
years of operational, technical and data manage-
ment experience in the financial services industry.
Prior to joining SunGard through an acquisition in
February 2002, she held numerous positions includ-
ing chief operating officer at Tradeline.com, and
senior vice president of product operations and
director of data services at IDD Enterprises, L.P.
KEY SERVICES & PRODUCTS:
referencePoint
KEY LOCATIONS:
London,
New York,
Singapore;
DATA SERVICES MARKET GUIDE 2007 INVESTOR SERVICES JOURNAL 79
Data Services Market Guide
SunGard's referencePoint is designed to solve
the problems associated with the collection and
management of reference and market data
across an enterprise. Provided as both licensed
software and a fully outsourced managed serv-
ice, referencePoint offers a global, scalable, and
component-based framework for the creation
and control of enterprise-wide "golden copy"
reference and market data.
W: www.sungard.com/referencepoint
FAME
A front-to-back market data solution, FAME pro-
vides investment professionals and intermedi-
aries with a suite of products including real-
time market data feeds, Web-based desktop
solutions, application hosting, data delivery
components, tools for analytic modeling and a
historical database for storing, managing, ana-
lyzing and delivering high-volume time series
data. Currently used around the world by lead-
ing institutions in the financial, energy, and pub-
lic sectors, FAME delivers complete data con-
tent, helping firms save time, minimize risk and
enhance overall productivity.
W: www.sungard.com/fame
KEY CONTACTS:
Bill Creed, Vice President, Sales America
SunGard
888 Seventh Avenue, 12th Floor, New York,
NY 10106, T: + 1 212 506 0353
John Wallis, Vice President, Sales EMEA
SunGard
25 Canada Square
London E14 5LQ
T: +44 (0) 20 8081 2435
 Service Provider - PROFILES
Richard Newbury
COMPANY BRIEF:
Telekurs Financial is a company in the Telekurs
Group, which operates in the fields of financial
information, payment transactions and IT servic-
es. As a leader in its field, Telekurs Financial spe-
cializes in the procurement, processing and distri-
bution of international financial information for
investment advisory services, portfolio manage-
ment, financial analysis and securities administra-
tion. A global network of local financial market
specialists procures real-time stock exchange
information at source from the leading financial
centres. Containing over 2.7 million financial
instruments, the database of structured, encoded
securities information maintained by Telekurs
Financial and its ten representative offices abroad
is unparalleled throughout the world in terms of
both depth and data coverage.
As the official numbering agency for Switzerland
and the Principality of Liechtenstein, Telekurs
Financial is responsible for allocating Swiss secu-
rity (Valor) numbers. It is a founding member of
the Association of National Numbering Agencies
(ANNA) and leads the way in introducing stan-
dards aimed at simplifying trading and securities
administration.
Telekurs Financial provides a wide range of dis-
play and feed products for different purposes.
They are accompanied by several local products
and services.
KEY LOCATIONS:
Telekurs (UK) Ltd
15 Appold Street
London
EC2A 2NE
80 INVESTOR SERVICES JOURNAL DATA SERVICES MARKET GUIDE 2007
KEY SERVICES:
Telekurs iD: new Web-based (Java applet) display product
generation giving users access to Telekurs Financial's entire
range of data and functions. A number of packages geared
to the needs of different banking departments are offered.
Valordata Browser, a user-friendly search engine providing
access to descriptive data, corporate actions and valuation
prices, is integrated into this product.
Telekurs iD html: The HTML version can be used by com-
panies who have limited bandwidth for transmitting finan-
cial information or whose corporate policy does not permit
the use of the Java applet.
Telekurs iD mobile: Telekurs iD mobile offers easy access
to current prices for all securities in the Telekurs Financial
database for mobile devices (currently BlackBerry). The
mobile version works together with Telekurs iD in the
client’s office. Personal user lists can be maintained on the
move.
Valordata Browser: As a convenient search engine, the
Valordata Browser rapidly and easily finds the instruments
that meet a special combination of search criteria, even with
complex questioning, and in just a few seconds.
Intraday Pricing Service: Snapshot service which enables
the valuation of portfolios several times daily. The timing of
snapshots is tailored to each client’s requirements. It is flexi-
ble and can be easily changed. The requirements for timing
of snaps may vary significantly: intraday snaps, market close
times or traditional EOD after the integration of all market
corrections.
Valordata Feed (VDF): structured and encoded descriptive
and corporate events data; ratings and reference data for
instruments and institutions, corporate actions, cash flows,
valuation prices; the data feeds are supplied several
times a day.
KEY CONTACTS:
T: +44 (0) 20 7550 5000
F: +44 (0) 20 7550 5001
E: info@telekurs.co.uk
W: www.telekurs.co.uk
 Precision. Dexterity.
Quality. Trust.

Whatever you want from your data.

E N T E R P R I S E D A T A M A N A G E M E N T

Business is about effective
relationships and none
more so than that between
trusted data and your mission-critical
business applications. Quality data helps you
run your business better. And GoldenSource
represents just that: a single source of truth
to power your enterprise.
GoldenSource solutions dismantle barriers.
Using the industry’s most comprehensive
financial data model, GoldenSource creates
a consistent and centralized data
management layer. This transforms your
reference data for all financial instruments,
clients and counterparties into trusted and
interlinked data assets across your company.
GoldenSource can also store positions,
balances and transactions to show a real-
time aggregated view of risk and exposure.
That is why our applications are used by so
many leading financial institutions. To find
out more, email info@thegoldensource.com
or visit us online.

Trust your data to work

thegoldensource.com
 Reference Data Management –
Who should handle it?

Enterprise data
REFERENCEPOINT management
solutions

For more than 12 years, SunGard has been a leading provider of data management solutions,
offering software and managed historical data services to over 300 sites for 120 clients globally.ˆ

SunGard’s referencePoint Managed Data Service (MDS) enables financial institutions to outsource their
Enterprise Data Management (EDM) process to a stable, reliable partner.

Today, senior level industry executives, market specialists, and analysts believe EDM will be one of the
pillars integrating and driving the next generation of financial services. Given this backdrop, we
commissioned a study with A-Team Consulting to survey market participants to determine the answer:
‘Is the time for outsourcing reference data management upon us?’

The results speak for themselves:

• 66% of data managers would be willing to outsource external data management
• 60% of data managers would consider offshore hosting for their data management services
• 95% of respondents would be open-minded to the outsourcing concept and indicated a willingness
to consider outsourcing for their data management process

To find out how your enterprise can reap the benefits of a managed services solution, or to receive a
free copy of the Outsourcing Survey, contact SunGard today.

Americas: 212.506.0300 Europe: +44 (0) 20 8081 2000

Asia/Pacific: + 65.6416.9790 www.sungard.com/referencepoint
Trademark Information: SunGard,and the SunGard logo are trademarks or registered trademarks of SunGard Data Systems Inc. or its subsidiaries in the
U.S. and other countries. All other trade names are trademarks or registered trademarks of their respective holders.