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| Automating the Data Ecosystem |
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| Written by Neil Edelstein | |||||
| Tuesday, 01 January 2008 | |||||
| GTNews | |||||
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Automation in the financial services industry takes various forms. For much of the last ten to fifteen years the trade lifecycle has been the focus of automation efforts. It has been estimated that approximately $10 billion was invested in this process, and it's not a stretch to suggest that estimate is low when one considers the sheer effort involved. The goal of efficiency and enhanced control in the trading lifecycle is undoubtedly a valuable one we all still benefit from today. Starting with pre-trade research and data collection and moving through the actual price discovery and trade execution stages, automation enables these processes as well as those efforts later in the trade lifecycle, such as confirmation, settlement and reconciliation, to be conducted much more easily and more quickly. Our industry is now in the midst of a shift towards automation that is in many ways analogous to efforts made with regards to the trade lifecycle. Always the backbone of the financial services industry, data is now being looked at in a new way. The management of this extraordinarily valuable commodity can be broken down into component parts based upon the organization undergoing the effort and the point at which the data, from its sourcing to ultimate end user consumption, rests. Organizations that represent all of the component parts have each invested to some degree in automation and solutions that will enable them to more easily communicate with one another. However, a watershed period is now underway where each of these disparate organizations and processes are now seen in a holistic fashion which we call the "Data Ecosystem". Members of the Data EcosystemThe beginning of the Data Ecosystem is where the data is created. This data can originate from either an exchange, with the underwriters of new securities, or ultimately with the issuers of these securities. Data then moves from the source into the hands of various entities which enhance it and imbue it with additional value. These entities include data vendors that aggregate and productize the data; service bureaus and managed data services that take the data and provide specialized, custom offerings for clients; and other groups that act as liaisons to financial institutions. Institutions take possession of the data, distribute it to various business applications (including operational systems and client reporting packages) and deliver the data to specified end-users to transform the data into the building block by which the capital markets function.Automation BenefitsWhen we examine the Data Ecosystem in this holistic fashion, with all groups entwined with one another, it's clear that it can benefit from further automation. Today, the concept of a standards-based, business rule-driven and exceptions-managed process is being touted by groups such as the EDM Council and is beginning to take hold at various stages along the Ecosystem.With rigor applied to both the process and technology of data management, we can ensure that data is captured via standards based messaging at any point in the ecosystem, subjected to a commonly defined set of business and integrity tests, enhanced and verified, or highlighted for human adjustment before returned to the cycle. There are a myriad of benefits to be gained by automating the Data Ecosystem. Similar to automation in the trade lifecycle, there are immediate advantages with regards to operational efficiency and enhanced control. Where in the past the development of data and its movement through the ecosystem was somewhat stilted, an automated approach will allow all the participants in the Ecosystem to accomplish their function, from sourcing to consumption, more easily, quickly and with fewer breaks in the process. Firms will also benefit from the sudden availability of staff due to exceptions-only based processing, cost savings based on rationalization of data usage and faster processing, and the potential for revenue gains based upon more timely, higher quality data. Firms also stand to reap significant internal benefits as they attempt to automate the creation and management of positional data. In a way, the financial organization itself is a "creator" of data and member of the ecosystem, not just a consumer. This information, when centralized in a consistent manner, creates access to the financial totals and details firms require to make fully informed financial decisions, deliver superior customer service and manage daily operations. Positions and balances can be aggregated across a variety of different levels such as by client, by firm, or by department, as well as by sub-ledger such as available cash, pending settlements, available collateral and/or pledged securities. As our industry continues to acknowledge the value in automating data throughout the data ecosystem, financial firms can expect a strong call to action to adopt common data definitions and communication standards to facilitate the rapid transfer of data from source to consuming applications.
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