Mark Davies
DTCC Avox Data Services
LEIs, UTIs and UPIs are needed to propel the financial services industry out of the Stone Age and into the industrial revolution. Mark Davies of DTCC Avox Data Services explains

How is the financial services industry reacting to the implementation of LEIs?

LEIs are just another example of a large structural project that is being rolled out on a global basis. They are already mandated in derivatives reporting regulations in the US and Europe but will soon be enforced in both of these jurisdictions as part of other regulations, including MiFID II, CSDR and SEC reporting for US registered investment companies.

What has become apparent is that some market participants, even at large organisations, haven’t yet realised just how commonplace LEIs will be.

Looking in particular at MiFID II, no firm will be permitted to place a trade without having a valid LEI code at the time of sending the order. That LEI will remain within all the record-keeping throughout the trade flow, and there will be an LEI code attached to every single piece of transaction data. It will certainly be incredibly useful.

Currently, some data is standardised while some is not. When an order is placed on an exchange, the broker does not need to know who the client is—that comes with the allocations as subsequent data. The whole process is made up of disconnected sections—the broker, the exchange, the client, the custodian, the CSD and the CCP. Some of these are connected and some are not.

The data model is discordant, but it was never designed as one holistic, whole thing. LEIs are intended to correct that disconnect, but they will have to be mandated in order to do that.

Some market participants already have a proper data strategy, complete with LEIs, in place. Others, particularly small buy-side firms and corporates, haven’t yet realised that this is going to be mandated and haven’t yet started to make preparations to comply with the directive.

What about UPIs and UTIs?

Both UPIs and UTIs are far earlier on in the development stage. They will eventually be mandated in exactly the same way as LEIs, and they will also bring enormous benefit to the market.

At the moment, UTIs only address OTC derivatives market, because that is where the regulatory need is. However, it's interesting to consider whether the UTI process can be applied to other asset classes, such as equities, fixed income and foreign exchange, and whether those asset classes represent the same level of risk and opacity that exists in the OTC derivatives market.

I believe it will be a successful project but it will take time as it will require global structures, governance and alignment.

How much difference will successful implementation really make?

LEIs, UTIs and UPIs are needed to propel the financial services industry out of the Stone Age and into the industrial revolution. Our industry needs to embrace these data standards and the standards need to be mandated globally.

This requires constituents from all corners of the financial community, including regulators, market participants, infrastructure providers and other technology firms to collaborate in the implementation of this project.

There’s a realisation that, in comparison to other industries, when it comes to data we, the financial services industry, is far behind. If you consider the aviation industry; airport signs, lights and rules are the same all over the world. That didn't just happen by accident; it happened through industry standardisation projects.

Interviews
The latest interviews from Asset Servicing Times
Between geopolitical turmoil and the ongoing regulatory challenge, the Luxembourg funds industry remains strong, says ALFI chair Denise Voss
Real Estate Investment Times

Visit our sister site
for all the latest real estate investment news

realestateinvestmenttimes.com
View interviews section
Features
The latest features from Asset Servicing Times
The main challenge is developing a solution that is both flexible and scalable that can support ETF managers across various regions and asset classes, says Dominic Crowe of Citi
Asset managers are increasingly relying on data, and the service providers that can manage it, heard attendees at London’s TSAM conference
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
As the long-standing Barclays Point risk analytics solution winds down to retirement, investment managers have some tricky decisions to make, according to Confluence’s Katie Kiss
Fund administrators could be best off leaving back-office technology upgrades to the professionals, says Kelly Ashe of Pacific Fund Systems
In the search for alpha, appointing an investment fund and a management company can bring myriad benefits, says Eduard von Kymmel of VP Bank
Fund distribution is entering the digital age, and so can traditional service providers. Fundsquare’s Paolo Brignardello explains
Blockchain may be the talk of the town, but before the industry starts moving ahead, it has to figure out in which direction it will go
Technology is changing the way we live, work and invest. Experts discuss how transfer agency is reacting as the movement gathers pace
View features section
Country profiles
The latest country profiles from Asset Servicing Times
The Asian market may be improving on the harmonisation front, but the situation is still far from ideal. Experts discuss what there is still left to do
Brazil is hogging the limelight from its South American neighbours. But, although reforms are in full swing, there is still work to be done
Securities Lending Times

Visit our sister site
for all the latest securities lending news and analysis

securitieslendingtimes.com
No nation is an island, and the Polish CSD has post-trade services to cater to all of Central and Eastern Europe, says KDPW’s Iwona Sroka
In a region as geographically, culturally and economically diverse as Asia, funds passports have a tricky road ahead if they’re to redefine the industry
Amid cross-border restrictions and tightened belts, Luxembourg’s kingdom of real estate investment won’t be crumbling any time soon
The Chinese market has taken a knock to its confidence, but despite its size, it is still merely an emerging market, and must take these setbacks in its stride
Rich in sunshine, cork hats and tired clichés, Australia’s funds industry doesn’t buck the trend, boasting record levels of assets under custody
As the Saudi Arabian stock exchange finally opens its doors to foreign investments, the influx from abroad will be in baby steps, not leaps and bounds
View country profiles section