Securities Reference Data Utility: draft outline of the concept
a. What could be done?

Create a “Securities Reference Data Utility” (the Utility), an electronic, online register that would,
firstly, collect, during the issuance process, from the issuer and in a standardised way, reference data
for each security and, secondly, would offer to the public, the market authorities and the financial
industry a single, reliable source of reference data on securities.
b. How could it be done?

A legal obligation for issuers to deliver during the issuance process an “electronic data sheet” to the
Utility and to maintain it throughout the life of the security.
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
Create a (small) entity that would set up the data standard in a dialogue with the financial community,
issue templates for collection, manage the process and the database, provide services to users and
further develop the Utility and the data standard over time.
c. Legal framework

Research is being conducted on identifying the best avenue for introducing a workable mandatory
legal regime to support reporting standardised data into the Utility within the EU and to establish the
framework for its operation and development.

In order to secure a level playing field within the EU and critical mass from the start, it would be
preferable to include non-Euro area issuance markets within the EU at inception.

Talks with relevant parties in the USA will provide an indication of the willingness to join such an
infrastructure. The same sounding out will be done for other countries with relevant financial markets
to ensure the broadest base for the envisaged infrastructure.
d. Governance and organisation of the Utility

Governance should have a global appeal to enable broad participation. Ultimate “owners” of the
Utility should ensure acceptance through credible competition-neutrality; they should enjoy support
and authority in the international community and financial markets. The BIS, central banks, the IMF,
regulators could be among the Utility’s potential “owners”. Representation of private parties in the
governance of the Utility should be evaluated, possibly in the form of financial industry associations.

Organisational development of the Utility could be designed in steps
o
Beginning with a light structure, akin to the International Counterfeit Deterrence Centre hosted
by the ECB or, as a “weaker” format, STEP.
o

Later, the Utility could potentially be spun off as a small independent entity
The Utility would require at least the following functions to be performed or controlled by it:
o
Information technology to run the database and its connection to external parties (f.i. website)
o
Training and certification of analysts authorised to input data (see business model)
o
Service to users (see business model)
o
Monitoring of market developments and evolution of the standard. This function could be
performed through a network of experts. ISO the International Standards Organisation, could
provide us with advice on the organisational and procedural set-up of such a network.
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e. Business model of the Utility

The Utility could be a financially self-sustaining, non-profit and competition-neutral entity

The issuer of a security would bear the cost and ultimate responsibility for the registration of that
security and for maintenance of the data throughout the lifecycle of the security, whereby that task
could be outsourced to commercial service providers, e.g. the existing data providers

Data for the Utility would be produced by analysts trained in the data standard and certified by the
Utility to ensure consistency and high quality. The Utility would ensure relevant training and
certification of analysts employed by issuers or service providers.

Citizens, official and commercial users would gain access to relevant sections of the data, the former
for free, the latter against a fee. For instance, commercial data providers, for whom reference data is
usually not a competitive differentiator, could source from the Utility better reference data at a much
lower cost.

The Utility would be a source for clean reference data for the CSDB and other ECB purposes, for
regulators (CESR, national regulators), as well as for other public bodies, industrial federations and
authorities.
f.
Positioning of the Utility in the data supply chain and impact on commercial data providers

The Utility would be positioned upstream of the current Commercial Data Providers in the data
supply chain. It would be mainly a second-tier supplier, providing high quality, low cost reference
data to the CDPs who would continue delivering their product ranges to their clients in the financial
industry.

Using the Utility as a source for reference data would help CDPs reduce their production costs while
delivering reference data of better quality to their customers. CDPs might even slightly increase their
margins while offering marginally lower prices for their products.

Data users (e.g. banks) can leave their systems and supply chain untouched. They will simply notice
improvement in the quality of reference data from suppliers who source them from the Utility, as well
as much better consistency among reference data from the different CDPs they use. It is unlikely that
financial institutions will source reference data directly from the Utility as a first tier supplier; indeed,
that would increase the complexity of their
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
The Utility should have a limited impact on competition among CDPs, especially the larger ones for
which reference data is more a “hygiene factor”, similar to the tyres of a car: it is necessary to sell the
product, but doesn’t give much of a competitive advantage.

Of course, CDPs would be free not to use the Utility and to continue generating reference data with
their own resources, as so far, if they deem it preferable.

CDPs would need to continue generating reference data to cover those markets, securities and
attributes that the Utility doesn’t cover. That should remain a large volume for quite some time and
decrease gradually only.

Whereas there might be an impact on the business of CDPs for which reference data would be a main
component of their product, that impact is likely to be stretched over time, along the growth of the
Utility’s coverage across markets, securities and attributes. That should give those businesses time to
adapt.

CDPs should be well placed to win contracts with issuers for producing and maintaining in the Utility
the data sets for their issues. The Utility would thereby open up new business opportunities for them.
g. How would the data standard be defined?

Unequivocal description of content requires taxonomy and a data model that are state-of-the-art, in
line with industry norms and standards, accepted as competition neutral by the market and available
now.

The data standard needs to be open and extensible to adapt to financial innovation.

The data standard would build upon internationally established standards to maximise continuity with
existing systems, thus protecting legacy investment and minimising spending. For instance the ISIN
code should be generalised for identifying securities.

The development of standards currently under preparation would be boosted, for instance a unique
identifier for issuing entities.

The ECB could build on its significant expertise in the CSDB project. The data model of the CSDB
Phase 2, now entering production, fulfils all criteria above. It could be offered as the basis of a
standard with potentially little more development work needed.
h. Development of the Utility: start feasible and useful, grow over time

The Utility should aim to begin with coverage (geography, types of securities, attributes) that is
feasible and provides critical mass enabling it to be useful from the start
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
The Utility would begin by covering simpler classes of financial instruments and would expand
coverage to further classes of instruments, also as experience grows

The Utility should aim at the broadest geographical coverage, beginning with at least the EU and
hopefully the USA

The Utility would begin by covering new issues. Securities already outstanding could be loaded over
time, beginning with the simpler classes, sectors, larger volumes and for long residual maturities.

The Utility would begin by covering a set of feasible yet useful attributes to serve needs of main
groups of users. The set of attributes covered could expand over time, driven by need and feasibility.

Overall, the Utility should grow as it learns and driven by demand it creates through the quality it
offers.
i.
The role of central banks and regulators in developing the Utility

Central banks and regulators are now uniquely placed to drive and catalyse such a move.

Both sets of institutions
o
have acquired visibility and authority throughout the turmoil
o
are perceived as neutral in the competitive game
o
enjoy trust in the probity of their agenda
o
are in the focus of great expectations for significant contributions to drawing lessons from the
financial crisis and building a healthier financial system for the future.
j.
Benefits expected from the Utility

Credibility of transparency, visibly delivered to the public as any citizen will be able to consult data
for a given security or run searches across securities.

Transparency at security level: the Utility would allow access to reliable data of any security covered
and could offer a link to relevant documents (e.g. prospectus).

Transparency at market level: the Utility would enable to build reliable macro pictures of the field of
securities markets, in any desired plane. This is a new feature; performance increases with coverage.

Easier near-time monitoring of exposures of institutions, groups or countries to specific issuers,
groups of issuers or types of instruments (similar to the CSDB – Lehman Brothers case in September
2008, but much more efficiently).
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
Easier quantitative and ongoing monitoring of market developments, e.g. the growth of new types of
instruments. Moreover, more entities in society could independently conduct such surveillance, which
contributes to market transparency, fosters trust and reduces risk.

Easier evaluation of central bank collateral; the Utility could be developed to enable looking-through
more complex securities.

Market integration: a single source for reference data across markets would provide a visible sign of
integration and ease cross-border and cross-institutional processes.

Efficiency of processes in the financial industry could be improved, f.i. by enabling progress in
straight-through processing, technically possible but often hampered by weak and inconsistent data.

Operational risk in the processes of the financial industry would be reduced.

Reputational gain for the institutions involved in the creation of the Utility:
o
For solving an increasingly pressing problem that the industry failed to solve for many years and
is not near solving. This could be obtained at fairly low cost to the institutions involved.
o
For contributing to market integration.
o
For contributing to a publicly very visible element in the now very visible quest of transparency.
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