IBOR’s time in the spotlight

The concept of an Investment Book of Record (IBOR) is gaining in prominence. Many asset managers, with complex IT infrastructures and outsourced operations, are coming to see that the use of traditional tools to provide position data can no longer cope in today’s markets.

Often such architectures are based on a separation between the Trading Book of Record and the Accounting Book of Record. This leads to investment decisions based on an incomplete, out of sync, and hence incorrect view of positions and investable cash. The IBOR solves these problems by capturing all events across all asset classes and systems to maintain a position record that is always up­to­date and correct. This position – including investable cash – is available to front­office users as a far better foundation for investment decisions and risk assessments.

It is clear to see why the past two years have seen a spike in the number of firms considering adopting an IBOR. Regulatory demands mean that collateral management is now a required element in investment decision-making. This is impossible without a timely, accurate overview of all positions which is accessible to all areas of the business. In addition, new rules such as the European Market Infrastructure Regulation (EMIR) have introduced intensive and frequent reporting requirements. These have brought data management to the fore to be able to comply in an efficient and meaningful way.

What’s more, it is becoming imperative that firms have a thorough insight into what is happening throughout the business, with less reliance on manual processes. The reputational risk associated with major trading incidents is only preventable when firms have access to timely and accurate information as well as an overview of all position data.

The news that the IBOR Standards Working Group within the Investment Management Association (IMA) published a standards paper in May was indicative of how the IBOR is set to become a permanent feature of the investment landscape. However, with the increase in popularity, as the paper rightly points out there is a need for consensus on what exactly an IBOR should be and the minimum criteria it needs to fulfil. While there may be divergence in each client’s needs and how they choose to implement it into their systems, there needs to be consistency in agreeing what functions represent an IBOR.