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After spending the majority of its lifetime as a necessary group of information whose accuracy was taken for granted, reference data has experienced a renaissance in recent years, spurred on by events in all main areas of the securities business. Seemingly all at once, trading evolved into a highly automated operation where split-second decisions are made by computers. Just as importantly—albeit with less fanfare—the industry moved in unison to improve processing efficiency and reduce costs. Lastly, and with major impact, regulators clamped down on the securities industry, requiring fearful institutions to hastily assemble reports and implement procedures driven largely by their internal reference data. Now this long-neglected crucial element of the business was becoming a bulls-eye on the docket of every firm in the industry.

One of the obstacles to reaching their goals was the way in which reference data had been viewed and approached in this industry. It was, and still is, hard to implement a major, impactful, change to reference data. At any given time, most large firms could count the number of reference databases and managing organizations operating within their organizations to be somewhere between 25 and 75. In order to truly be effective, reference datasets should be enterprise wide. But while any enterprise-wide initiative must come from top down, most firms still drive them from the bottom up, stymieing nearly all large efforts.

Now the industry as a whole has seized the reference data issue. Whether addressing their problems through internal process redesign, technology infrastructure, third-party software, or full-on outsourcing, the hunt for the pristine “golden copy” of data is on, with a diligence falling somewhere between the searches for Carmen Sandiego and the Holy Grail. The quality of data and effectiveness of process have each improved, lending credibility to the industry’s efforts. However, as the business continues to dynamically evolve, it has come to the conclusion that we’re only in the early innings of the game, and the rules are changing as we go.

Now that we have a catalyst for this, and have reached at least a modest level of acknowledgement on the obstacles, where will we go for real solutions? Many would like us to believe that it’s the outsourced or shared service models. Since both asset managers and brokers have embraced outsourced solutions in other areas of their business, is the time right for outsourced EDM?

The answer depends on whom you ask. Many different types of firms have either already introduced, or are investigating the opportunities for, outsourced solutions. From consulting firms to BPO organizations to market data vendors to technology platform providers to industry utilities to various combinations of all of the above, there promises to be no shortage of providers. For any to succeed, they will undoubtedly need to gain the trust of an industry that—although it has had success with outsourcing in other areas—has done little but waver in its past acceptance in the reference data segment.

A Table of Contents can be found below.

Table of Contents