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WHERE IS THE OFF RAMP ON THE “SPEED and SPEND” HIGHWAY

It would seem that taken to its logical conclusion the “industry”
would continue to spend huge amounts of money speeding up its acquisition and access to market, order, trade and execution data. I wonder for what purpose?

Surely each firm’s increment of speed or data acquisition
advantage is met with another’s step up in spend rate to one-up and gain temporary advantage.  This speed and spend frenzy is overlaid on VERY important capital and contract market infrastructure that is the life blood of the global economy. The transactions that flow through its communication pipes and computers allow capital to seek its best uses while supporting the techniques of risk management that is supposed to mitigate the risk of each transaction and/or a portfolio of such transactions.

It seems to me that as an industry we are failing to understand
that it is mainly our customers that pay for the costs of maintaining the speed and spend highway. We will surely lose their trust when the whole thing goes “pop” AGAIN. Then where are we?

Let’s get real, get our “industry” leadership to get us to a better place before the regulators take us AGAIN to the woodshed, perhaps this time to permanent purgatory!

The FSB’s statement today on a going forward framework for the LEI initiative reaffirms both their seriousness and their diligence in confronting one of the most serious gaps in the global financial system’s infrastructure. The lack of a global identification system for financial market participants and the products they own, trade and process has inhibited risk aggregation for observing the contagion of systemic risk. It has cost billions annually in unnecessary infrastructure costs at global financial institutions. It has spawned numerous financial market utilities whose primary existence is purposed on resolving ambiguities in data identification and in reconciling data quality issues. Its absence has been a factor in headline grabbing operational risk events, in regulators’ inability to see that which they are mandated to oversee, and in preventing the fulfillment of the financial industry’s long sought vision of straight-through-processing.

My firm and the group of global technology leaders and other stakeholders that we have assembled for accommodating the FSB’s LEI requirements looks forward to working collaboratively with all stakeholders toward a successful first implementation of a globally federated identification system for financial market participants. See:

 Global Identification Standards for Counterparties and Other Financial Market Participants ... Journal of Risk Management in Financial Institutions - Special Issue on Counterparty Risk, Vol. 5, No. 2 at http://ssrn.com/abstract=2016874

   --Allan D. Grody, President, FInancial InterGroup Holdings Ltd.   

Gentlemen - words like "nirvana" and its equivalent "boiling the ocean" are remnants left over from the can't do crowd. We have regulatory compulsion (or will have if the G20 stays the course) for identifying uniquely, unambiguouusly and universally every financial market participant  (the LEI) and the products they own,trade and process (the UPI). 2-3 million of these, 80 million of those - not very big or troublesome at all! What is troublesome is the thought that it will be just another number - we cannot let that happen. For example we have alreday organized a consortium to tackle the STP problem and to make sure that the transition from multiple and proprietary business entity identifiers is short lived. For example the same federated servers that support the distributed LEI utility in our proposal to the FSB and the CFTC will support mapping software to resove proprietary codes into LEI's and LEI's into proprietary codes - all in the network. See our proposal by clicking on www.ssrn.com/abstract=2016874