Bringing it all together
Goldstein: aggregating data from more than 100 sources
It has become a cliché to say that satisfying the regulatory requirements facing financial services organisations comes down to data, but like many clichés, it is based on truth.
More accurately, firms need timely high quality data for reporting purposes and to automate many related processes such as KYC and anti-money laundering, as well as non-regulatory tasks such as corporate actions processing.
For years a large cottage industry has existed with firms producing datasets in these niches. Twenty years ago it was common for these firms to produce datasets overnight and distribute them on CD to clients for incorporation into their own systems.
The internet changed that of course, and what was formerly called static data morphed into the reference data industry, and though there are still areas where the data may not change very often, the drive is towards updating it in as close to real-time as possible.
With the post-crisis regulatory framework now pushing firms to the realisation that they cannot manage the data themselves, the reference data world is front and centre, and that cottage industry is burgeoning.
One firm riding the wave is Alacra, set up in New York in 1996, just as at the internet was beginning to drive that transformation.
It now has 60 staff – 45 in Lower Manhattan and 15 in London – with some 300,000 end users at over 200 financial institutions, professional service firms and corporations using its applications to find, organise, analyse and present business information.
Alacra’s approach is to source data from business information databases and incorporate it into configured workflow applications for client onboarding, client screening, vendor risk management and front office business research.
“We are a content aggregator, so we have relationships with probably a 100 different publishers – pretty much anyone who sells business information,” says Steve Goldstein, chief executive at Alacra. “The first business that we had was to aggregate and resell business information over the internet, and the first challenge we had was that access was not ubiquitous. The other thing was a chicken and egg problem – it is hard to get access to information when you don’t have any customers, and it’s hard to get customers if you don’t have any data.”
Initially the target market was investment banks, management consultancies and the four big accountancy firms. “The use case was ‘imagine you’re an investment banker and you are going to see a chief executive’ – we have all the information that you need to know before the meeting: shareholding information, earnings estimates, transaction history, news biographical information, product information. We have all that stuff in one place.”
Currently it has some 200 licences with information providers including ratings agencies such as Moody’s Fitch Ratings and Standard & Poor’s, indices like MSCI Barra, corporate actions data providers like Exchange Data International as well as sources such as Dow Jones, Thomson Reuters, S&P Capital IQ, SunGard and Lexis Nexis.
That business did well till the crisis of 2008 when the market slowed, but fortunately the company had developed two other product lines, one in reference data and one in the soon-to-be all-important compliance space. “The reference data product was addressing the problem that all the vendors had unique identifiers like Thomson Reuters’ proprietary RIC – Reuters Identifier Code – plus all the other industry identifiers including BICs, ISINs and Cusips. “In order to make our products work, we needed to map all those things anyway, so that if you were asking about Johnson & Johnson you got the right Johnson & Johnson,” says Goldstein. “We had a large and deep identifier map that we built reference data products around not only for banks, but for professional service firms as well. The use case might be that t bank had multiple data siloes that they wanted to bring together, and we can help with that, and we have some clients who give us their CRM data to map, cleanse and de-dupe.”
By combining licensed and web-based content Alacra also provides a range of entity reference data solutions that helps clients maintain accurate legal entity data and meet global regulatory requirements.
It also naturally led the firm into the world of legal entity identifiers, and it now also works with capital markets research firm Tabb Group on the latter’s Legal Entity Identifier Comprehensiveness Ranking. The most recent of these, published in December, showed that DTCC/Swift led 13 other Legal Entity Identifier registration authorities around the world in based on data consistency and uniformity.
The rankings compare LEI providers on the consistency and uniformity of their LEI data as aggregated by P-LEI.org. Alacra provides a more in-depth analysis of LEI quality, comparing issued LEIs against the body of global rated, regulated and listed counterparties and entities that should have an LEI.
Perhaps more importantly, the study shows that the LEI process is “challenged” say Tabb and Alacra.
“Having a consistent, uniform database is only part of the picture in implementing an effective LEI system,” said the eponymous Larry Tabb, founder and chief executive of Tabb Group. “Ensuring appropriate entities are covered is, if not more, important. Although the LEI universe is growing, the universe of relevant and covered institutions isn’t. To better gauge this, we partnered with Alacra to track important LEI adoption statistics. Alacra’s process for assessing and tracking ongoing LEI relevance to the financial services industry enables us to have greater insight into whether LEIs being created are relevant to institutions, regulators and the health of the industry.”
The results were not encouraging to those who support the LEI, and gave fuel to the many and vocal critics of the process: only 15% of entities with a credit rating, 15% of entities that are listed on global exchanges, 17% of organizations with a Swift BIC code and 51% of European Banking Association entities have an LEI. While many are properly set up, a large percentage of them were issued to organisations not engaged in financial markets transactions, let alone the complex derivatives transactions that LEIs were developed to track.”
More recently Alacra formed a partnership with Accuity, the publisher of Bankers Almanac, a reference source for financial counterparty assessment and KYC due diligence (and one which has its roots back in the pre-CD world when it was published as a yearbook. The partnership will integrate Bankers Almanac’s new Due Diligence Data File with Alacra Compliance Enterprise, increasing the speed and of the client onboarding process for mutual customers.
