While there’s general consensus across the buy-side regarding the value IBOR can deliver to investment firms, the debate over how best to implement it still rumbles on. There are many challenges in providing accurate position data for investment purposes
whilst ensuring consistency of transaction data across the organisation (custody, accounting, trading, reporting etc.).
IBOR needs to incorporate the latest data from all systems involved in the lifecycle of a trade and across all asset classes. This includes trading and risk analytics systems across the front and middle office, as well as post-trade compliance, accounting,
collateral management, cash management, settlement and custody systems across the middle and back offices. The multitude of systems and networks in place is now even greater (through M&A growth for example), since many firms use several different order management
systems, as well as different systems for collateral management and corporate actions… and the list goes on. This creates the very fragmented environment we are all know and love today!
Given the number of systems in place, the time lag (batch-based processing systems) in the data flowing downstream, and the differences in the way the data is formatted and recorded between systems, it’s little wonder firms struggle to achieve a single,
accurate version of the data, which they can deliver in a timely (real-time) way.
Much of the ongoing debate around IBOR centres on the need for processes to be improved, with many advocating the creation of a centralised data warehouse of trading information. But best practise shouldn’t stop there. Only by checking and validating the
data arriving from all systems, by using real-time reconciliations can you be confident that you’re presenting the most accurate and reliable data back to the front office. It’s also important when selecting matching technology that you are not constrained
by fixed data models (as most of the legacy vendors are), meaning lengthy and expensive implementation projects. Critically, the earlier you can reconcile in the process, the sooner any trade exceptions can be detected and acted upon, preventing trade failures
or losses later down the confirmation and settlement chain.
The question you must ask yourself is whether your IBOR implementation gives traders the accurate, up-to-date data they need to support them in making the best investment decisions. At the end of the day IBOR should deliver real-time financial certainty.