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SIA Standards & Protocols Committee. Recommendations to SIA on Standards for Securities Processing Automation Prepared by Michael Atkin (FISD). March 25, 2004 Draft 1 (3/5/04). Executive Summary. The SIA Standards & Protocols Working Group was established to:

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sia standards protocols committee

SIA Standards & Protocols Committee

Recommendations to SIA

on Standards for

Securities Processing Automation

Prepared by Michael Atkin (FISD)

March 25, 2004

Draft 1 (3/5/04)

executive summary
Executive Summary
  • The SIA Standards & Protocols Working Group was established to:
    • Assess the role of reference data standards in helping to establish the infrastructure for securities processing automation
    • Identify the scope of relevant standards-based initiatives needed or underway
    • Assess the possibility of delivering functional and operationally viable standards (that meet the objectives of efficiency and risk mitigation) in a reasonable time frame
    • Define and understand the global standards development process including how and where SIA should leverage its position
  • The initial recommendations of the Working Group are:
    • The ISO standards development process (while cumbersome) is both viable and functional
    • There are four standards activities currently underway in three core areas that (if successful) will provide a common data and protocol infrastructure for securities processing automation. The objectives are real and achievable.
    • The Working Group recommends that SIA should
      • Publicly support these standards activities as both an organization and as a participant in the global Reference Data Coalition (REDAC)
      • Provide oversight to the ISO standards development process to ensure that the initiatives remain on task to deliver value to SIA members
      • Encourage SIA members to directly participate in the standards development process at the practitioner/operational expertise level


standards protocols evaluation process
Standards & Protocols Evaluation Process
  • The SIA Standards & Protocols Working Group met six times over the past 8 months (from June 2003 – February 2004)
  • The active participants in the Standards & Protocol Working Group are:
    • Norm Allen (Bear Stearns)
    • Michael Atkin (FISD/MDDL, X9D, ISO TC68/SC4, REDAC, UII Working Group)
    • John Bottega (Credit Suisse First Boston)
    • Mary Dupay (Goldman Sachs)
    • Cecilia Holden (Merrill Lynch)
    • Steve Kelly (Goldman Sachs, Reference Data Coalition/REDAC)
    • Kevin Smith (Bank of New York, ISITC IOA)
    • Steven Lachaga (JPMorgan)
    • Simon Leighton-Porter (Citigroup, RDUG)
    • James Leman (Citigroup)
    • Sandy Throne (DTCC, X9D, ISO TC68/SC4)
    • John Panchery (SIA)
    • Brad Smith (Capco)
    • Judy Smith (Morgan Stanley)
    • Sanjay Vasta (Merrill Lynch Asset Management)
    • John White (State Street Global Advisors)


the reference data connection business case
The Reference Data Connection (business case)
  • Reference data is in the spotlight (according to Tower and others)
    • Inconsistent, incomplete or inaccurate reference data is the #1 cause of internal STP failure
    • Over 30% of all transactions breaks are caused by poor quality reference data
    • Costs … to repair trades … to correct mismatches … from settlement delays … to maintain security master files … and from trade failure are significant – and increase as errors pass through front ($6), middle ($16) and back ($50+) offices
  • Reference data is used everywhere (front, middle and back), is decentralized (multiple systems and processes) and relies on manual operations to scrub, update and maintain data. About 40% of a trade record is composed of reference data.
  • Overall goals of the standards activities are to reduce costs and manage operational risk (efficiency is still the mantra)
  • Information architecture and reference data push to normalize data, synchronize master files, reduce infrastructure costs for integrating data from multiple sources and promote information exchange
  • Shorter cycles mean more automation is needed. Reference data standards are needed to facilitate automation


four pillars of reference data standards
Four Pillars of Reference Data Standards
  • Goal is a common market data infrastructure for securities processing automation
  • Four core components
    • Identify all financial instruments with precision (multiple listings)
    • Identify all business entities for processing efficiency, regulatory compliance and risk mitigation
    • Identify all data elements associated with a financial instrument lifecycle with absolute precision (standard terms, definitions and relationships)
    • Define a common distribution protocol for efficient and accurate processing


standards for instrument identification uii
Standards for Instrument Identification (UII)
  • Instrument identification is fundamental
    • ISIN alone is not sufficient (ISIN is unique at issue level, but not instrument level -- one ISIN is shared among offerings in multiple locations)
    • Official place of listing (OPOL) is needed to differentiate instruments
    • Place of trade is needed for intra-day pricing decisions and market compliance
  • REDAC paper on requirements for UII has received global validation
  • LSE SEDOL and ASB extension both meet the criteria
  • New ISITC/REDAC/RDUG Working Group on UII Implementation
    • Document errors caused by instrument identification problems by asset class and function
    • Assess how issue can be resolved by adopting the UII scheme (at 15022 message level)
    • Cost/benefit analysis (business case) to establish implementation priorities at the operational level


standards for business entity identification
Standards for Business Entity Identification
  • Real processing and regulatory compliance problems exist and there is no international standard for linking legal entities and portfolios under management
  • Identifiers are needed for
    • Due diligence to set up new accounts/verify entities for new business
    • Communication of trade processing information and for automated post trade allocation/settlement (FIX)
    • Regulatory compliance (KYC, AML) and timely reporting of transactional information and client/corporate entity relationships
    • Managing risk requirements for grouping entities (operational risk, Basel II and G30 recommendations)
  • Instructions come in different formats with all sorts of proprietary and internal identifiers
    • Difficult to automate the order execution, trade allocation and settlement processes (processing efficiency)
    • Difficult to precisely extract reporting, transactional and relationship information (regulatory compliance and risk mitigation)
  • IBEI activity has been correctly specified and approved by ISO TC68/SC4 Working Group 8
  • Focus is beyond conceptual theory and on the design/structure of the identification scheme (complete, functional, operationally viable, commercially acceptable)


standards for content market data model vocabulary
Standards for Content (market data model/vocabulary)
  • Standard terms, definitions and relationships for all market data elements
    • Eliminate confusion about the meaning of terms – regardless of source
    • Ensure completeness of terms required for any application
    • Common data format for efficient processing
  • Common names, values, formats are the logical basis of any reference data strategy within financial institutions (information architecture level)
  • Data Model/Common Market Data Vocabulary has been correctly specified and approved by ISO TC68/SC4 Working Group 11
    • Mission is … “to produce a data model and ISO Technical Specification that provides a single standard for describing a financial instrument throughout its lifecycle comprised of completely defined data elements and how they relate to one another.”
    • In essence – define all data elements (and their relationships) used by all segments throughout the information chain (from issuance through asset servicing) correctly and with absolute precision
  • WG 11 result will incorporate 15022 data field dictionary (transactions), MDDL specification and TDR (market data) and other specifications (i.e. FIX and SWIFT as interface points)


industry standard protocol
Industry Standard Protocol
  • Industry standard distribution protocol for market data (both static and streaming)
    • Decouple the technology of the interaction between provider and consumer of market data from the content
    • Providing one set of software to receive and distribute data means less infrastructure costs for integrating data from multiple sources (no longer have to normalize, integrate and maintain multiple formats and interfaces)
  • Bring static (reference data) and streaming (real time pricing) applications toward a common (the same) market data content standard
    • Must overcome the “chicken and egg” problem (e.g. customers say … “we agree with the standards objective, and as soon as our vendors deliver it we’ll adopt it. Closely followed by vendors saying … “as soon as our suppliers deliver XML, we’ll adopt it for onward redistribution to our customers.” On the heels of exchanges saying … “we’re interested in a standard distribution protocol – prove it.”)
    • fisdMessage was developed to compress/compact streaming XML to be as efficient as existing datafeed distribution – and it works!
  • User firms are very interested in the industry standard protocol because of the economies of scale in design, production and maintenance of datafeeds, processing systems and applications – as well as the extensibility benefits of XML for which fisdMessage is designed.
  • The business case for an industry standard distribution protocol is very compelling



The Standards Landscape

Ownership Stake


American Bankers Assoc. (ABA)





ISO Standards

Part of ISIN

Local Identifiers(~65 in total)









Ownership Stake

Registration Authority



Business Entity Identification

Instrument Identification

Legal Entity Identification





US Representative to ISO



SWIFT(Reg. Authority)


Registration Authority






Agreement to make ISO 15022 “XML Aware”



FIX Protocol Limited





ConvergenceISO 15022 XML













Membership Involvement



Standard (Reference Data or Message)

XML Conformance Standards

OASIS(XML Conformance Standards)



XML Conformance Standards



standards landscape explained
Standards Landscape Explained
  • The ISO standards development and adoption process is complex – but it is both viable and functional
    • Global standards development needs careful and thoughtful analysis to ensure they are functional and operationally workable – and the ISO structure works
    • The pace of development/adoption can be significantly expedited if there is broad conceptual buy-in, operational practitioners are involved in the design of the standard and professional facilitators are involved in the development process.
      • UII -- is already well out of the gate (commercial solutions)
      • WG8/business entity identification – has broad conceptual buy-in and the standards process is in place and correctly specified. Operational leadership is being managed by REDAC/RDUG (assistance is needed here)
      • WG11/data model and vocabulary – has broad conceptual buy-in, the standards process is in place and correctly specified and is based on “real activities” (MDDL and 15022 DFD). Additional operational leadership is being managed by FISD/MDDL (assistance is needed here)
  • Global coordination to ensure that the four standards activities (and their associated business cases) are well defined, viable, functional, operationally palatable and commercially acceptable is required for success.


  • Relevant SIA Committees should
    • Challenge the hypotheses related to the importance of the four standards pillars (verify the premise)
    • Publicly support these standards activities as an organization
    • Actively participate in the global Reference Data Coalition (REDAC) to ensure there is a single and coordinated voice on reference data and protocol standards
    • Closely monitor the ISO Standards development process (ISO TC68/SC4 Working Groups 8 and 11) to ensure the standards output remains in line with real industry priorities and requirements
    • Provide operational experts (by function and asset class) to directly participate in the standards development process
    • Continue to help steer the debate about STP as a business priority by helping define the business case and ROI metrics.
  • Cost containment and risk mitigation is still the mantra … standards are the key to achieving automation objectives … leadership and global coordination is needed … the global financial industry is paying attention … the ISO process is oriented correctly … this is our window of opportunity!