Data Discussion Slides
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- Manufacturing transparency requires visibility into connections between participants and asset class exposures at both the participant and aggregate levels. - The capital markets sector consists of banking, insurance, and capital markets. The banking industry moves most capital between parties through transactions and recordkeeping. - Various intermediaries play "gatekeeper" roles for capital coming into investment sub-sectors for each capital markets sector. The securities markets subset provides transaction utility for trading assets like stocks, bonds, and funds.
Data Discussion Slides
- 1. Manufacturing TransparencyRequirements:Visibility into and measurement of: Connections between participants; Asset class exposures at participant and aggregate levels.Requirements:Definitions – Who Trades What Where How, Temporal Sequencing
- 2. CleanData!Financial Services broadly consists of three subsectors…Banking
- 3. Insurance
- 5. The vast majority of the Capital within an economy moves from one party to another via transactions and recordkeeping performed by or through the Banking industry.
- 6. Various intermediaries, specific to each Capital Markets sector, play “gatekeeper” roles for capital coming into the Investment sub-sector.
- 7. Securities Markets is the subset of Capital Markets that provides transaction utility for assets.Who does What?
- 8. Core Securities Markets ~ 1975 - presentMutual Funds, based on portfolios of Listed Equities and (primarily Sovereign) Bonds are starting to become standardized for Retail markets.The majority of the Equities, Commodities, and “Options” markets are Exchange-based.
- 9. Everything else is OTC Represent assets/cash flows by source
- 10. Core Securities Markets ~ 1975 - presentRetail equity and fund markets explode in size.
- 11. Overall volumes and notional amounts grow exponentially in equities markets.
- 12. For market participants, complexity increases significantly – the industry gets dramatically more complex in terms of products and services.
- 13. Retail investors change composition of product mixes, supply chains, and marketing strategies.
- 14. Technology enables significant increases in complexity with minimal cost.
- 15. Increasing cross-border investments and market impacts.
- 16. Securitization of debt instruments, combined with growth of hedge funds to create the Credit Default Risk market.WHO TRADES WHAT WHERE HOWWHO -- Buyers and Sellers – here we look only at descriptive attributes, not intentions or strategy. TRADES – Types of transactionsWHAT – Types of fungible InstrumentsWHERE – Venues -- Transaction-enabling organizational frameworksHOW – Mechanics and process from Ordersto Closed Trades--varies by Instrument Type and Venue – based on historical evolution
- 17. WHO TRADES WHAT WHERE HOWBuyers and Sellers – All Venues*Financial Markets Firms Central Banks
- 18. Deposit-taking corporations except the central bank
- 20. Non-MMF funds
- 21. Other Financial Intermediaries except Insurance and Pension funds
- 23. Captive financial institutions and money lenders
- 25. Pension Funds*IMF/BIS/ECB definitions May 2009
- 26. WHO TRADESWHAT WHERE HOWCore tradable items -- Shares -- equitiesBonds -- debtUnits – Currencies, commodities, portfolios (funds)Core derivative items --Forwards/FuturesSwapsOptionsCustom Contracts – bi-lateral deals
- 27. WHO TRADES WHAT WHEREHOWExchange-based MarketsOTC MarketsListed Equities MarketsATFs, MTFs, ECNs, etc. Private, bi-lateral contractsDealer Markets – from paper/fax/phone to private/public aggregations of order flow Begin appearing in the 1990sVENUESTransaction Frameworks
- 29. ISDA Market Survey Results 1987-PresentBy volume and notional value, the currency and interest rate markets dwarf the others.Timely data acquisition is Expensive…
- 30. Securities Data Model: FlowsIssuerExchangeCentral CounterpartyCentral Securities DepositoryIssuer AgentData vendorSecurities dataTransaction dataClient SideMarket sideReference dataReference data12
- 31. Manufacturing supply chain is a bit hairy, and differs by asset classParty roles valid for the FI class 'fund'Party roles valid for the FI class 'bond'Party roles valid for all FI classesPaying AgentLead ManagerRemarketingAgentFund ManagerInvestmentAdvisorDepositorybank BondCounselTrusteeLead UnderwriterRate FixingAgentIssuerFund AdministratorFund OrderDeskTransferAgentFixingAgentConversionagentLegalAdvisorFiscalAgentGuarantorFund AccountantFund OrderDeskDistributionAgentPrincipalColl. AgentExchangeAgentActors for EquitiesGuaranty BeneficiaryTenderRegistrarAuditorAgent BankCalculationAgentPublicationAgentPrincipalPay. AgentProxyAgentProxyAgentNomineeListingAgentTransferorLombardAgentFinancial Instruments related Institutions' Registry - Business information modelRegistered institution acting with Financial InstrumentsInstitution IdentifierRegistration details Institution detailsIREG identifierAlternative institution identifiers13
- 32. CIVs *(Collective Investment Vehicles)Investment Advisors /Fund ManagersBroker / DealersIssuers and guarantors Financial InstitutionExchanges &Trading SystemsCorporate ClientsCustodian / AgentBanks/ Prime BrokersService and Data ProvidersBanksSettlement & ClearingOrganisationsAnother view … standards based …* In its capacity as a party to a transaction (eg. Investor)14
- 33. But then, Someone always has to decide exactly what and how to record descriptions of business activities….An Evolutionary Example, based on FpML …
- 34. 16Trade vs. ContractTwo structures describing the same informationBusiness process need to be duplicatedExamples: novations, terminations,…Validation rules need to be duplicatedISDA legal documentation uses term ‘Transaction’. ‘Trade’, ‘deal’, ‘contract’ and ‘transaction’ are often used interchangeably.
- 35. 17Trade vs. Contract (Solution)The ‘contract’ concept could be removed from the schema and the CUG messages reverted to a ‘trade’ based modelMigrating Contract messages to trade has been analyzed (see separate presentation)
- 36. 18Trade Roles: Solution (I)Separation of Party and AccountMake relationships clearerBeneficiary or servicing party should be provided
- 37. 19Trade Roles: Solution (II)Internal tradesCurrent model assumes buyer & seller always differentDifficulty to represent internal tradesNew optional account referenceSingle party in both sides is possibleInfo for settlement
- 38. 20Trade Roles: Solution (III)Other Roles and AccountsSupport ‘Give-Ups’ and custodian accountSimpler implementationLess indirectionStill Under Discussion
- 39. Asset Class EvolutionDiscussion slides
- 40. US “junk bond” market
- 43. Not only have new instruments been created for trading, but the relationships between instruments are changing.