Industry trade confirmation lobby Isitc is putting the finishing touches to a white paper that outlines a new approach to dealing with the high rate of settlement failures resulting from data discrepancies between fund managers, custodians and broker dealers.
In an early morning session at the Finexpo conference and exhibition in London, a panel of industry experts - including Richard Cato, senior operations manger at HSBC, John Wilson, director of business development at Man Financial, Chris Smith, vice president of STP products at TradeWeb, and Teri Humphreys, head of market operations and data management at Baring Asset Management - debated the merits of SSIfresh, a new model for settlement that calls on the custodian community to maintain trade data on local databases for download and enrichment by buy side clients.
The SSIfresh concept has been bubbling under since the summer when Isitc Europe brought together a loose collective of 14 firms to look at the problem of dirty data. With software donated by Microsoft and input from fixed income network TradeWeb, the group put together a prototype Web services database that uses existing technologies and messaging standards.
Rather than having all sides to a trade duplicating and mainatining their own data, the model envisages buy side firms dynamically interrogating allocation data held by custodians, enriching that information and then firing off instructions to the sell side.
Man Financial's John Wilson says the prototype system developed by the group was put together in less than a week and would cost a typical custodian less than $30,000 to build. Custodians could either hold the data locally or continuously broadcast updates to local databases that may be hosted by clients direct or by third parties such as TradeWeb.
Wilson says the group is a month away from producing a final paper that will be presented to the FIX user group for approval.
Introducing the session, HSBC's Richard Cato said the project was a reaction to the failure of the industry-led GSTPA and the continuing inability of the industry to tackle the duplication and often inaccurate static data that afflicts settlement operations. "We think we've got a cheap solution based around the FIX model," he said.
However, custodians in the audience were dubious about giving up their data to third parties and felt the group would struggle to gain sufficient traction to challenge commercial settlement utility Omgeo.
Omgeo, which operates its own global Alert database of settlement and account instructions, was described by one delegate as an "entrenched industry monopoly".
HSBC's Cato says Omgeo was invited by Isitc to join the Finexpo debate but declined.