1	The Story on Standards for STP Automation Tech-Ops Conference Michael Atkin, SIIA/FISD July 30, 2003
2	The Age of Standards? STP is not an event, it’s a business objective Only bad things can happen between trade date and settlement The lack of STP costs the industry about $12 billion annually Regulatory requirements are pushing the envelope The ongoing goals are to reduce costs and manage operational risks (efficiency is the mantra) Data standards are required to facilitate automation
3	The Reference Data Connection Common understanding of data elements for trading/settlement is required Reference data fuels STP 40% of a trade record is composed of reference data Ubiquitous, manually captured, poorly synchronized and not standardized 30% of trade failures are a direct result of inaccurate reference data Shorter settlement cycles mean more automation is needed
4	Three Legs of Standards The goal is to define the data elements needed to precisely describe assets, accounts and transactions Three types of standards Identification of things Data model and vocabulary Distribution and messaging Litmus test – practical, viable, commercially reasonable Beware of the efficiency paradox
5	Standards for Identification Unique and precise identification are at the core of reference data Instrument identification is fundamental ISIN alone is not sufficient FISD research = ISIN + OPOL + MIC Four criteria for precision Unique at all levels/applications Intraday allocation for SMF set-up All tradable instruments must be numbered Proprietary solutions are problematic
6	UII Example
7	Standards for Entities International standard identifiers linking legal entities, issues, funds and counterparties are desired Regulatory compliance and risk management objectives Efficient transaction processing objectives Business entity relationships are critical - but we must resist putting solutions in front of problem definition and industry alignment on strategy!
8	Standards for Entities Discussions are underway – but industry consensus on problems to solve does not exist Industry-wide approach to compliance research? Definitive source of legal entity relationships (standard identifier)? Standard cross-referencing scheme/account number for settlement and allocation instructions (legal entity to funds)? What’s the relationship to OMGEO Alert Codes, ISO WG8 (IBEI), Crosswalk (S&P/Telekurs/D&B), FIX4.4?
9	Data Model and Vocabulary Standard information architecture is the foundation of reference data management Common data format makes processing more efficient Integrate multiple sources Feed multiple applications Avoid costly data translation and data normalization Common understanding of financial instrument attributes (terms, definitions and relationships) are needed
10	Relevant Content Standards Market Data Definition Language (MDDL) reference data, corporate actions and pricing Financial Information eXchange (FIX) messaging standard for securities transactions and vocabulary for pre-trade indications of interest SWIFTML post trade settlement and confirmation TC68/SC4 Working Group 11 data model for securities industry and central repository for financial terms and definitions within the 15022 Data Field Dictionary
11	Market Data Definition Language (MDDL) XML-based specification to enable the interchange of information necessary to account for, analyze and trade financial instruments Common format so that data can be efficiently passed from one system to another Uniform taxonomy to promote a common understanding of data content and data relationships
12	MDDL Includes Full spectrum of financial domains Pricing related information Trade-related information and measures (symbology, volumes, indexes) Macroeconomic statistics (public and private sector) Security master file data (corporate actions, descriptive data, shares issued, earnings, splits, dividends, etc.) MDDL Status and next steps Release 2.1 (basic set-up and pricing) Vocabulary review and integration into 15022 DFD MDDLquery, MDDLservice, MDDLmessage
13	15022 Market Data Model Creation of Working Group 11 under ISO TC68/SC4 Define the business model Define the messaging requirements Generate physical message formats Central repository for all terms, definitions and relationships Define the UML data relationship models
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15	Current Standards Landscape Groups ISO TC68/SC4 SWIFT ANNA FIX protocol Ltd. FISD/MDDL ISITC-IOA ISDA, Inc. RIXML.org Other Standards SEDOL CUSIP and other local codes OMGEO Alert Crosswalk ISO Standards ISIN (ISO 6166) BIC (ISO 9632) MIC (ISO 10383) CFI (ISO 10692) Currency, country 15022 DFD XML Standards 15022 2^nd Edition MDDL FIX RIXML FpML
16	Global Coordination is Required Reference data and standards discussions are pervasive (SIA, ISITC, SMPG, SWIFT, BMA, ISO, LSE, RDUG, FISD, ASB, ANNA, DTCC, vendors) Global coordination across all functions in the transactions lifecycle is required Formation of the Reference Data Coalition Ensure that data reference requirements are well defined and clearly articulated Ensure that operational and commercial issues are addressed Evaluate and promote coordination among the standards activities
17	REDAC Structure Governed by Steering Committee of data consumers Managed by Advisory Committee representing all involved segments (broker/dealers, investment managers, custodians, vendors, exchanges, numbering agencies, technology enablers/utilities) Steering Committee Bank of New York ● Barclays Global Investors ● Clearstream Banking ● DTCC ● Gartmore Investment Management ● Goldman Sachs & Co ● HSBC ● Massachusetts Financial Services ● Merrill Lynch ● Morgan Stanley ● Northern Trust ● Salomon Smith Barney ● State Street ● Wellington Management Company REDAC is providing global coordination on standards with ISO, SIA, BMA, ISITC, SMPG, ANNA, RDUG, FIX, SWIFT, ISMA, OMGEO, DTCC
18	How to Move an Industry Definition of issue (is it clearly defined?) Agreement among participants (do we have buy-in?) Strategy and metrics (is there a shared view on how to solve that are operationally/commercially viable?) Alignment of interests (do we have agreement among involved parties?) Implementation management (can we herd the cats?)
19	Final Thoughts Cost containment and risk mitigation is still the mantra Standards are the key to achieving automation objectives – but problems exist and global coordination is difficult The financial industry is paying attention – we have a window of opportunity Get engaged
20	Contact Information Michael Atkin Financial Information Services Division Software & Information Industry Association (p) 202-789-4450 (e) matkin@siia.net (web) www.fisd.net, www.mddl.org