Reference data in the trade lifecycle

Reference data plays a critical role in supporting various functions and systems through the lifecycle of a trade. Although these functions may vary by firm, all institutions need accurate and timely descriptive and identification data to ensure they are dealing with the correct instrument, client or counterparty. Without comprehensive reference data, firms risk breaks in trading workflows, requiring expensive reconciliations and potentially damaging client relationships.

Effective reference data management is critical to financial institutions’ ability to respond to client requests for information about new opportunities. This may relate to new products a client wishes to invest in, or new markets it wishes to participate in. In either case, clients need appropriate security or entity identifiers, ownership information, regulatory data and trading rules. All of these data points are critical to maintaining the trading workflow, and failure to access the right data at the right point in that cycle risks potentially expensive disruption.

With reference data touching most points of the trading workflow across all asset classes globally, data suppliers have traditionally settled on a commercial delivery model that provides for bulk download of entire data sets for a standard fee. This has emerged as the default pricing model for most of the major suppliers, although the arrangement is not optimal for all data consumers.

The depth and breadth of data required by a financial institution depends on the range of activities conducted - by itself and by its clients. For its own activities, any firm will have a clear view of what data is required. It’s more difficult, however, to predict what activities clients may undertake and by extension which data sets they will need to support those activities.

“...the more clients an institution needs to service the greater the requirement for reference data.”

Clearly, the more clients an institution needs to service - and the more complex the activities of those clients - the greater the requirement for reference data. For large sell-side firms supporting multiple large investment management clients, the likelihood is that the reference data requirements is substantial.

For many of these firms, standard bulk delivery of reference data is an acceptable methodology for consuming the reference data they need to support their wide-ranging activities. The comprehensiveness of these bulk delivery arrangements with commercial suppliers allows firms to cater to the superset of needs of their multiple clients.

This article is an extract from our whitepaper, "Embracing Automation and Collaboration Tools to Inject Reference Data into the Trade Lifecycle"