Reference Data Management: Regulation, Risk, and Remodeling Data Around Legal Entities

by Muralidhar Dasar, April 15, 2013
Industry Trends
Global

Abstract

Managing reference data is beginning to acquire strategic priority, with new regulatory proposals potentially remodeling of the ways in which reference data is acquired, processed and consumed by various parties. Firms are now increasingly looking to address data management challenges at an enterprise level than a functional level.

In the report Reference Data Management: Regulation, Risk, and Remodeling Data Around Legal Entities, Celent examines emerging trends and paradigms in reference data management driven largely by regulation and risk management imperatives.

The buzzword in data management circles is regulation. There is anticipation and some uncertainty among market participants as to how new regulatory requirements will translate to new technology requirements and changes that need to be made to the existing systems. There is clarity that increased transparency will be required, driven by consensus around improving risk management, which would entail compulsory pre-trade risk checks, intraday updates, and even on-demand access to risk information. A large number of financial institutions do not yet have an infrastructure in place that can provide consistent risk information across the enterprise which is a major challenge that firms are looking to address in the next 2-3 years.

Annual spending on reference data management is estimated to be in the range of US$35 billion to US$37 billion in 2013, as shown in Figure. Reference data feeds account for a significant part of the total spending on reference data management. Celent estimates that firms spent around US$21 billion on reference data feeds in 2012.

“Reference data management systems are still predominantly used for managing basic data and subscribing for instruments, with increasing focus on automating corporate actions,” says Muralidhar Dasar, Analyst with Celent’s Securities and Investments Group and author of the report. “Risk management is a key theme; managing counterparty risk and complying with regulations intending to minimize risk will be driving forces for reference data management over the next two years. Additionally we see a larger role for reference data management systems in enterprisewide data analysis.”

This report begins with an evaluation of existing practices and challenges in reference data management, the changing requirements of financial institutions and best practices. The report examines how firms are increasingly addressing data management challenges at a strategic level and their roadmaps for adopting newer data management paradigms such as entity-centric approach in the context of LEI implementation and deployment methods such as cloud computing.

This 24-page report contains 11 figures and three tables.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

Introduction

2

Reference Data Management in Financial Institutions

3

 

The Road Traveled

3

 

Areas of Concern

4

 

Implementation Methods

5

 

Spending on RDM

5

 

Looking Forward

7

What Is Driving Change in Reference Data Management?

8

 

Risk Continues to Take Center Stage

8

 

Regulation Is a Key Driver

9

 

The Promise of Legal Entity Identifiers

10

 

Changes in Market Structure and Trading Preferences

12

Outsourcing in Cloud Models

13

 

Outsourcing

13

 

Reference Data Management in Cloud

14

Conclusion

17

Appendix

18

 

Vendor Snapshot

18

Leveraging Celent’s Expertise

19

 

Support for Financial Institutions

19

 

Support for Vendors

19

Related Celent Research

20

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