fibv data vending workshop presentation
TRANSCRIPT
FISD: A Global Market Data Business Forum
Neutral trade association for organizations in the market data industry
140 organizational members around the worldMembers are responsible for their own strategic
and commercial interests within FISD Staff acts as a neutral facilitator of the
discussion and manager of the consensus agenda that emerges as a result
FISD Executive Committee
Exchanges (Chicago Board of Trade, Chicago Mercantile Exchange, Deutsche Boerse AG, Euronext, London Stock Exchange, Nasdaq Stock Market, New York Mercantile Exchange, New York
Stock Exchange, Toronto Stock Exchange) Vendors (Bloomberg Financial, Bridge Information, Financial
Times, FININFO SA, Primark Corp., Reuters, S&P Comstock, Telekurs Financial, Thomson Financial)
User Firms (Charles Schwab, Credit Suisse First Boston, Fidelity Investments, JP Morgan Chase, Lehman Brothers Inc., Merrill Lynch, Morgan Stanley & Co., UK Information Provider User Group, Wellington Management Co., LLP)
Tomorrow’s Data Environment
The new “age of efficiency and automation” is upon us
Standards: what you don’t know can hurt youFour Core Areas
Straight Through Processing Data Quality and Consistency Market Data Administration Intellectual property rights
Straight Through Processing
The automated processing of securities transactions from trade inception to settlement
The back office moves forwardSecurity identification in automated
environments (symbology) Links between instruments and corporate action
information Logic of symbol construction Coordinated global exchange symbology
Data Quality
MDDL (XML for market data)Data Volumes
Quote mitigation strategies Static data outside of trading hours
Data Flags Required for accurate processing Cancellations, corrections, halts, market status, etc.
Transparency of price types
Network reliability
Market Data Administration
Bring contracts up to dateTransparent, consistent and rational market
data business policiesBusiness models that promote e-commerceBusiness process automation
Product/customer identification standards Billing data element standards
Simplification of processes
What is MDDL?
XML-based interchange format on the fields needed to describe Financial instruments Corporate events Market-related indicators
Mission of MDDL Promote data interoperability Standard definition of terms and common use of fields Extensible!
Core MDDL Question
Why would vendors who have built a core business around proprietary data formats want to shift to an open format standard? User demand Enhance product functionality Straight through processing
Why Do We Need MDDL?
Application efficiency (user demand) Integrate data from multiple sources Shift resources from “data formats” to “data quality
Product functionality (data relationships) Standard data models Common data directory for multiple classes Data linkages
Straight through processing ISO 15022, BEI, ISIN, message standard is XML
MDDL Requirements
Support multiple vendors Common vendor interface Common request format
(ISIN, ticker, instrument type)
Accommodate vendor and exchange specific fields
Support entitlement and permissioning requirements
Standardize data field names
Provide a mechanism for validation and data quality
Facilitate security identification for STP
Common request/response interface
Market Data Regulation
What’s going on? Securities and Exchange Commission Advisory
Committee on Market Information House Financial Services Subcommittee Database protection
Environmental Factors Demutalization/for-profit exchanges Online trading/retail investor access Decimalization and capacity issues
U.S. Market Structure
SEC ObjectivesExchange Act and 1975 Amendments
Section 11A (establishment of National Market System)
Transactions Reporting Rule Quote Rule Display Rule
Issues Being Addressed
The definition of transparency NBBO (best quotation and last sale) Data beyond mandatory minimum
Consolidated data streamCost of market data and revenue sharingAccess to data (terms and conditions)Data ownershipCapacity and quote mitigation
Advisory Committee Recommendations
Transparency Fundamental component of NMS Counterbalance to fragmentation
Does existing systems provide sufficient transparency? Merits of display rule Provision of data outside the display rule Availability of factors of production
Recommendations
Consolidation Single versus competing consolidators Systemic risks
Plan Administration Transparency of fees, contractual terms, business
requirements and administrative procedures Rationale of business policies Automation of business processes
Recommendations
Fees and Revenues No change to statutory standard NYSE withdraw from CTA SEC oversight
Capacity NBBO for options No penny increments More aggressive quote mitigation strategies
Recommendations
Data Ownership Not part of “Seligman Committee” Competition and vendor display rule Regulatory structure inhibits competition
Focus of Congressional inquiry Database protection legislation Feist Case -- Is the exchange the creator or collector
of market data? This is just the opening salvo in a long battle
Tomorrow’s Standards Today
MDDL, Market Data Business Policy, Symbology and Business Process Automation
Simplify, Automate, Standardize
New mantra for the global market data industryStandardization is good businessWill the global financial industry work
cooperatively to implement standards? STP standards (i.e. BEI, ISO 15022 data dictionary, MIC,
security identification/ISIN+, counter party ID)
Data distribution (i.e. MDDL, XBRL, NewML, price types)
Billing and reporting (i.e. product identification, customer
identification, billing data elements)
STP Standards
Firms are in the midst of technology planning cycles for STP Growth in domestic and cross-border trading volumes More complex investment/risk management strategies Lower margins (save money through productivity and
efficiency gains)
Regulatory requirements for T+1
Changing market conditions require a fast, efficient way to process transactions from point-of-trade to point-of-settlement
Unique Security Identification
Accurate and timely security identification is one of the keys to STP Most front-offices identify securities by name or symbol
while back-offices use number Primary identifiers must be accurate, unique, available
and usable
Incompatible databases and the lack of data standards mean high error rates, valuation errors, exception-based processing, trades of the wrong security and trade failures
Will ISIN Survive STP?
ISIN is an issue identifier standard Creation of the ANNA Service Bureau Accuracy, maintenance, quality issues on track ISIN alone is not sufficient for unique identification
Place of official listing is essential for pricing and settlement of multiple listings (NOTE: source of the data is the stock exchanges, not the numbering agencies)
Register is important for security routing Place of trade is important for due diligence and
market compliance
Data Distribution and MDDL
The end of the era of proprietary formats?Standard data formats are useful for
moving data between applicationsStandard data definitions (taxonomy) are
useful for creating data relationships and promoting content transparency
Market data (MDDL) is a component of many other XML initiatives (news, business research, STP, clearing/settlement)
Vocabulary Development
Common taxonomy for market dataMDDL Domains
Instruments (equities, collective investment vehicles, debt, contracts, units)
Indicators (indices, financial and exchange statistics, ratings, economic indicators)
Corporate events (notifications, descriptive data, fundamentals
MDDL Descriptors/Glossary
IdentifiersValuations (prices)MeasuresStatisticsDates and timesCurrenciesLocations
HoldingsLoads and fees Industry classificationAsset classSource IndicatorsFeatures
Technical Development
Extensibility is the keyMinimal structure definedXML schema and DTD supportedElement based approachConcept of reference listsProperty concept that inherits through
hierarchy
MDDL Status
Version 1.0 beta is now availableCommon equities, mutual funds and
indices only1.0 final at FISD’s World Financial
Information Conference (London)http://www.mddl.org
http:www.fisd.net/mddl
Market Data Business Management
Everything starts with the contractMarket data business policies
Exchange business practices Transparency of policies and consistency of
interpretation Data usage (redistribution, indices, derived data)
Business process automation
Contractual Issues
Principal document governing what vendors, redistributors and subscribers can/can’t do with the data
(1) definition of market data (7) exchange fees
(2) content and supply (8) unit of count
(3) agreements (9) billing and payment
(4) rights to use (vendor) (10) reporting requirements
(5) rights to use (subscriber) (11) audit requirements
(6) system descriptions (12) other market data policies
Problems with Contracts
Practical implications Old contracts/new situations Conflicts of interpretation Complex communications chain Global lack of uniformity
Market Data Policy Project
Comprehensive database covering all obligations and requirements covered by exchange contracts Compliance with contractual obligations Clear real-world interpretations Policy comparison Business considerations (i.e. external
redistribution)
Exchange Business Practices
Prior Approval versus Vendor Discretion (business model for redistribution of data)
User Classification (used to determine the rights to use data and fee levels)
Unit of Count (how market data usage is counted, priced and applied in contracts)
Exchange Business Practices
Billing and Reporting RequirementsSubscriber Agreements (used to determine
liability and to recognize rights and restrictions on data usage)
Non-Real Time Data (policies governing the use of delayed data)
Derived Data (extent to which vendors/subscribers can create their own intellectual property from exchange market data and under what terms)
Business Process Automation
Simplification and automation of business processes is important to everyone and one of our most important administrative objectives
Three core goals Data definition standards Process simplification Data consistency
In the age of e-commerce -- we can do better
Now for the Sales Pitch
Join FISD and get involved in this debate
Attend the 5th World Financial Information Conference October 30 - November 2 in London
Michael Atkin (direct) [email protected] (web) www.fisd.net