Reference data is the static information used in the administration of a securities transaction. It is typically sourced from a range of internal and external providers and fed into data silos scattered around the organisation. According to industry analysts TowerGroup, inconsistent data accounts for 60% of failed trades.
Patni's research on 100 UK based asset managers and banks found that about 91% of asset managers did not have a single supplier of reference data, with the remainder admitting that they were not sure of the source of their data. They reported that an average of 6% of trades have failed as a result of poor reference data.
Yet when considering solutions to the problem of managing consistent reference data, half of respondents said that they had not considered outsourcing this process to a third party. Their main reason for not outsourcing this process was potential loss of control, followed closely by a fear of security breaches. The overwhelming reason for considering outsourcing was the potential for cost savings, followed by higher levels of accuracy.
Philip Filleul, product manager for reference data solutions at Patni, said: "The twin pressures of achieving regulatory compliance and straight-through processing (STP) have highlighted substantial redundancy and duplication of effort in the area of reference data management. One in 10 trades fail on first settlement attempt and of these, 60% - 70% can be attributed to poor data management.
"Many buy-side and sell-side firms are now uncomfortably aware of both the time and costs they devote to purchasing, cleansing and distributing reference data, as well as the risks that arise when these tasks are not performed effectively, among them failed trades and lost revenue opportunities. Many are now willing to consider the concept of outsourcing all or part of this function to a trusted third party that can reduce costs and risks."
India-based Patni Computer Systems is a global provider of IT Services and BPO solutions. Patni's service offerings include application development and maintenance, enterprise application solutions, business and technology consulting, product engineering services, infrastructure management services, customer interaction services & business process outsourcing, quality assurance and engineering services.