DClear, the wholly owned subsidiary of the investment arm of the Dubai International Financial Centre (DIFC), has released plans for a reference data utility for the global financial market. The aim of the project is to provide a shared copy of reference data among financial market participants on both the buy and sell sides. It is hoped that DClear will be the first comprehensive clean data service providing all the reference data a company will need to trade and perform post-trade processing across a large range of financial instruments.
Leading the project are CEO Philippe Chambadal and new products director and chief technology officer David Penney, both of whom have extensive experience in the area of reference data. Chambadal founded the first enterprise information integration company, MetaMatrix, in 1998, which he subsequently sold to Red Hat in June 2007. Penney spent 15 years at Citibank in the design, delivery and support of trading systems including the front, middle and back office functions, before joining MetaMatrix as technical director and later managing director for the European business.
“Because MetaMatrix was instrumental in financial reference data projects, our success motivated a bank to approach us about setting up a utility,” explains Penney. “MetaMatrix, which was originally set to integrate market data, provide aggregated market data, and we found that Philippe had invented a piece of technology across all markets for integrating data together.”
According to Penney, DClear was established as a result of the request of a major tier one bank that was impressed by the success of MetaMatrix: “We started this company because a major tier one bank approached us about the need for a shared database of reference data for financial markets – we conducted extensive research speaking to many banks, brokers and hedge funds and decided that it not only makes sense, but also that the timing has never been better. Given our backgrounds we could make it happen. The business plan was formulated and we found an enthusiastic backer in the DIFC with the ability to stand behind a long term strategy – the goal is to build a significant company servicing all financial markets.”
A large proportion of trade breaks occur because of an issue with reference data, explains Penney. This kind of reference data provides no competitive advantage – the competitive advantage comes from having the majority of trades settle first time with the maximum level of automation. However much a firm spends on data, if the client or counterparty has different or incorrect reference data then it will break. This causes assets to be misdirected, unnecessary money to be spent and creates operational risk and actual operational costs to put right. This is true, be they hedge funds, asset managers, banks or custody clients, he continues.
As the service is aimed at both the buy and sell sides, the team is building specific offerings appropriate to each of these customer groups. “We see these being built in cooperation with a set of foundation partners who will clearly see the significant benefits early in the life of the utility as their clients and counterparties also join,” he says.
Smaller companies will also gain access to high quality data, just the way the large banks do, all without expensive in-house technology projects, he adds. Large companies will reduce costs for reference data, improve the quality and depth of data and gain access to the best reference data management technology and operations platform available. “We are able to provide data in a very low risk way to larger customers such as banks,” Penney explains.
Chambadal believes the benefits of the utility will be significant: “Today, 80 per cent of back office costs are associated with fixing broken trades, this is a long way to straight-through processing. Unmatched reference data is responsible for nearly half the broken trades: the DClear reference data utility aims first at eliminating these mismatches.”
The DClear team is currently at the planning and development stage of the project. To find out more, or to help shape the utility, contact dpenney@dclear.com
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