Key to success
03 May 2018
According to Pierre Khemdoudi of IHS Markit, the key to successful deployment of technology is investment, both in capital costs and workforce
Image: Shutterstock
The technology needs of the securities lending industry has evolved significantly and staying at the forefront whilst remaining cost conscious is a challenge. At IHS Markit, we’ve found that by partnering with industry participants on varying project scales, we’re able to focus on value-add services, which evolve with client needs. In our securities finance franchise, we are able to leverage the technology investments made across our enterprise—including resources for blockchain, machine learning and artificial intelligence—and combine them with knowledge of the industry specific needs of the global securities lending business.
The key to successful deployment of technology is investment, both in capital costs and workforce. Given the pressures on all firms to efficiently allocate human and financial capital, it’s essential that these investments be targeted. We have found that the best way to address industry needs is to establish a group of client design partners, which allows everyone to defray development costs, with a trusted vendor managing the process. For buyers of technology at global financial firms, this approach lowers the risk associated with development projects, while retaining control over project requirements. This type of thinking is exemplified in our know your third party (KY3P) and commission manager solutions, which were developed with design partners, and have seen significant client adoption.
A key area of investment for IHS Markit is regulatory reporting and the required technology infrastructure. We worked with the industry to prepare for the second Markets in Financial Instruments Directive (MiFID II), and were proud of the successful roll-out of that effort earlier this year. The need for regulatory solutions provides an opportunity for vendors to centralise costs and develop effective solutions, which work together rather than in a silo.
SFTR
The Securities Financing Transactions Reporting (SFTR) project is a perfect example of the design partner framework being applied to a regulatory solution. We invested early to architect the plan for a solution and formed a strategic partnership with Pirum. We approached industry participants and built a group of design partners whose input was critical up front, and whose feedback allows us to design for deployment ahead of next year’s deadline.
The broad nature of the requirements and large number of required fields—along with the consideration that within a single entity there will be multiple data reporting lines—meant a potentially costly implementation for firms and an uncertainty regarding trade matching at the repositories, with the potential disparities from different reporting mechanisms. In the regulation, we saw an opportunity to cut through the complexity and deliver a modular end-to-end solution for the market.
Given the particular requirements of SFTR, we entered into a strategic partnership with Pirum, who have 18 years of experience in matching and reconciling securities finance data through contract and billing compare services.
With our expertise in securities finance data, along with specialised knowledge regarding connection to trade repositories from the MarkitSERV loan processing business, we have been able to assemble best-in-class techniques toward the goal of a future-proof solution. The unique skill sets from IHS Markit and Pirum are merged into the SFTR design, and have given us an advantage in the management of participant legal entity identifier (LEI) codes as well as the creation and matching of unique transaction identifier (UTIs).
One critical aspect of the SFTR project is the need for massive scalability. The advantage of a diverse set of design partners is immense, allowing us to build the solution with confidence that it will deliver for individual client needs, as well as the total potential scale of reporting across the industry. A forward-looking approach that is built to scale is important when dealing with large datasets, and the combined reporting of all European securities financing transactions will certainly be that.
Another aspect of the project worth noting is the need for interoperability, ensuring our solution works efficiently with other vendor solutions. This highlights the importance of the vendor ecosystem thinking constructively about where it can add value, while taking cues from clients on their preferred mix of vendor solutions, which often complement solutions developed in-house. One tool toward that end is to carefully process mapping client workflows to gain a deep understanding of where the solution fits in and what the real requirements are.
New technology
Going forward, we see opportunity for new technologies to leverage data for the benefit of the industry. We have traditionally faced the securities lending industry as a data vendor, and data management continues to be the differentiator for us across our business. That is particularly true on the benchmarking side of our business, where data complexity can easily appear to be overwhelming.
As practitioners look to automate routine tasks, there is an increased focus on the timeliness, accuracy and means of delivery for data vendors. To answer that challenge, we have invested in a web-based front end capable of delivering an unprecedented depth of benchmarking data to a user-friendly graphical user interface. We’ve also increased the frequency of our data publishes, and added new fields such as inventory stability and short interest forecasts. And, most importantly, our increasing partnership efforts with other vendors point to a clear objective: we are partnered with the securities lending industry to deliver the most accurate and timely information to all stakeholders.
One place we’ve worked with clients who are leveraging new technology is in building pricing engines for lending rates. Given the wealth of data available, the opportunity to automate pricing has increased, along with a need for the cleanest indications at the point of trade for trades, which are worked manually. With financial firms making increased investments in machine learning and artificial intelligence, it’s likely that we’ll continue to see more resources going toward securities lending trade analytics. We also see opportunities to partner with clients in collateral management and post-trade reconciliation services, as their data and technology needs evolve.
A smaller scale technology build we’re excited about is our intraday service, which displays new trades throughout the day across time zones. The data aggregation aspect of this project has been underway since 2012, and we reached a quorum, which allowed us to make the dataset available to contributors in the fall of 2016. We’ve made consistent improvements to the contributor base as well as the processing timeline for new trades. We’ve also partnered with Pirum to reduce contribution challenges for mutual clients. So far, we’ve worked with our clients who value the timeliest data, and we anticipate even greater adoption going forward. The approach of allocating resources alongside client demand has served us well, allowing us to build a flexible platform, which can integrate directly from clients or other vendor partners.
Looking to the future, we anticipate a successful roll-out of the SFTR reporting solution in Q4 2018, and are fully engaged and committed to that end. We’re also looking at other opportunities to partner with our clients in building technology for their future needs. With new technology providing new opportunities to better leverage data, analytics and human capital, there are numerous channels for productive investments, and we look forward to pursuing them with our industry partners. We view IHS Markit as an information powerhouse, and that means having the highest quality data along with the most well thought-out technology solutions.
The key to successful deployment of technology is investment, both in capital costs and workforce. Given the pressures on all firms to efficiently allocate human and financial capital, it’s essential that these investments be targeted. We have found that the best way to address industry needs is to establish a group of client design partners, which allows everyone to defray development costs, with a trusted vendor managing the process. For buyers of technology at global financial firms, this approach lowers the risk associated with development projects, while retaining control over project requirements. This type of thinking is exemplified in our know your third party (KY3P) and commission manager solutions, which were developed with design partners, and have seen significant client adoption.
A key area of investment for IHS Markit is regulatory reporting and the required technology infrastructure. We worked with the industry to prepare for the second Markets in Financial Instruments Directive (MiFID II), and were proud of the successful roll-out of that effort earlier this year. The need for regulatory solutions provides an opportunity for vendors to centralise costs and develop effective solutions, which work together rather than in a silo.
SFTR
The Securities Financing Transactions Reporting (SFTR) project is a perfect example of the design partner framework being applied to a regulatory solution. We invested early to architect the plan for a solution and formed a strategic partnership with Pirum. We approached industry participants and built a group of design partners whose input was critical up front, and whose feedback allows us to design for deployment ahead of next year’s deadline.
The broad nature of the requirements and large number of required fields—along with the consideration that within a single entity there will be multiple data reporting lines—meant a potentially costly implementation for firms and an uncertainty regarding trade matching at the repositories, with the potential disparities from different reporting mechanisms. In the regulation, we saw an opportunity to cut through the complexity and deliver a modular end-to-end solution for the market.
Given the particular requirements of SFTR, we entered into a strategic partnership with Pirum, who have 18 years of experience in matching and reconciling securities finance data through contract and billing compare services.
With our expertise in securities finance data, along with specialised knowledge regarding connection to trade repositories from the MarkitSERV loan processing business, we have been able to assemble best-in-class techniques toward the goal of a future-proof solution. The unique skill sets from IHS Markit and Pirum are merged into the SFTR design, and have given us an advantage in the management of participant legal entity identifier (LEI) codes as well as the creation and matching of unique transaction identifier (UTIs).
One critical aspect of the SFTR project is the need for massive scalability. The advantage of a diverse set of design partners is immense, allowing us to build the solution with confidence that it will deliver for individual client needs, as well as the total potential scale of reporting across the industry. A forward-looking approach that is built to scale is important when dealing with large datasets, and the combined reporting of all European securities financing transactions will certainly be that.
Another aspect of the project worth noting is the need for interoperability, ensuring our solution works efficiently with other vendor solutions. This highlights the importance of the vendor ecosystem thinking constructively about where it can add value, while taking cues from clients on their preferred mix of vendor solutions, which often complement solutions developed in-house. One tool toward that end is to carefully process mapping client workflows to gain a deep understanding of where the solution fits in and what the real requirements are.
New technology
Going forward, we see opportunity for new technologies to leverage data for the benefit of the industry. We have traditionally faced the securities lending industry as a data vendor, and data management continues to be the differentiator for us across our business. That is particularly true on the benchmarking side of our business, where data complexity can easily appear to be overwhelming.
As practitioners look to automate routine tasks, there is an increased focus on the timeliness, accuracy and means of delivery for data vendors. To answer that challenge, we have invested in a web-based front end capable of delivering an unprecedented depth of benchmarking data to a user-friendly graphical user interface. We’ve also increased the frequency of our data publishes, and added new fields such as inventory stability and short interest forecasts. And, most importantly, our increasing partnership efforts with other vendors point to a clear objective: we are partnered with the securities lending industry to deliver the most accurate and timely information to all stakeholders.
One place we’ve worked with clients who are leveraging new technology is in building pricing engines for lending rates. Given the wealth of data available, the opportunity to automate pricing has increased, along with a need for the cleanest indications at the point of trade for trades, which are worked manually. With financial firms making increased investments in machine learning and artificial intelligence, it’s likely that we’ll continue to see more resources going toward securities lending trade analytics. We also see opportunities to partner with clients in collateral management and post-trade reconciliation services, as their data and technology needs evolve.
A smaller scale technology build we’re excited about is our intraday service, which displays new trades throughout the day across time zones. The data aggregation aspect of this project has been underway since 2012, and we reached a quorum, which allowed us to make the dataset available to contributors in the fall of 2016. We’ve made consistent improvements to the contributor base as well as the processing timeline for new trades. We’ve also partnered with Pirum to reduce contribution challenges for mutual clients. So far, we’ve worked with our clients who value the timeliest data, and we anticipate even greater adoption going forward. The approach of allocating resources alongside client demand has served us well, allowing us to build a flexible platform, which can integrate directly from clients or other vendor partners.
Looking to the future, we anticipate a successful roll-out of the SFTR reporting solution in Q4 2018, and are fully engaged and committed to that end. We’re also looking at other opportunities to partner with our clients in building technology for their future needs. With new technology providing new opportunities to better leverage data, analytics and human capital, there are numerous channels for productive investments, and we look forward to pursuing them with our industry partners. We view IHS Markit as an information powerhouse, and that means having the highest quality data along with the most well thought-out technology solutions.
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