GC Friday Interview: Steve Engdahl, SVP, Product Strategy, GoldenSource

While the industry faces more regulation, firms have the ability to reuse some of the data that they now must report, rather than having it die after sending it to the relevant authorities. By recycling the data and cross-referencing it, firms can achieve faster client onboarding and improve their risk management, for example. GoldenSource’s Steve Engdahl, senior vice president, product strategy, explains what firms can do with this data.


GC: What regulations are driving new data requirements around identifiers?

SE: Between Dodd-Frank and EMIR there are some common principles, like reporting of OTC transactions, and you have to have a Legal Entity Identifier (LEI), you have to have an agreed upon transaction identifier between the two parties, and you need to have a cross-identifier as well. So there are new data requirements and new data elements that need to be constructed or collected and need to be associated with instruments and with entities as well to be able to do that reporting.

So that’s one of the areas. A completely different type of regulation would be something like FATCA, the U.S. Foreign Account Tax Compliance Act. And with that one there’s traditional information that you need to gather about your customers, whether they are a U.S. person or not a U.S. person, and determine how to handle reporting to the U.S. government as well as withholding in some cases for some institutions. So there is information and workflow that you need to gather, and then also, interestingly enough, you need to provide an identifier for the entities upon which you’re reporting. And that identifier is not the LEI; it’s something completely different, which is the GIIN (Global Intermediary Identification Number), which is another new number that is being created now to identify entities.

GC: How can firms cross-use this data?

SE: The GIIN number typically comes up when you’re thinking about customer onboarding and needing to know which of those that have accounts with you are subject to reporting under the FATCA law. LEIs come into play when those entities with whom you’re trading with as counterparties are involved. Typically those are different data sets that are housed separately, particularly within a big firm. But, it’s very true that someone who is your customer may also be your counterparty on a transaction and may also be an issuer of securities that you’re processing. So there are many different ways that you can be related to that same entity. So what we’re starting to see is the linking up of these different datasets and using some unambiguous identifiers like the LEI as a means of cross-referencing into all those different places where you might have entity-related information stored. You can get a clearer picture of all your activity, in all the different ways and rolls and relationships you might have, with that business entity, and also enrich any of the data records in one side with the information that might be resident in one of those other datasets.

GC: How will the use of these identifiers play out over the next few years?

SE: I think right now, the LEI is midway through rollout, and that is taking hold and going to be a success. I think we’re going to have different identification schemes for entities; that’s also something that’s here to stay. Firms will always have their own internal numbers that they might want to use that they drive their systems with; they might subscribe to data feeds from commercial vendors who supply their own proprietary identifiers as part of that vendor feed. And then you’ve got things like the GIIN and LEI. So we’re going to be living in a world where there are multiple different identifiers and those identifiers are used for different purposes and where you’re going to have bits of client data stored in different place, and that’s understood. There’s been new things that are getting exciting, which is that firms are finding ways, using the new identifiers that are publicly available, to cross-reference [the data]. The business advantage you can get out of that is, for example, you can reduce some of the time involved in client onboarding if the entity that you’re onboarding as a client happens to be an institution who issues securities, and you might be able to cross-reference over to your issuer database, and that issuer database might have loads of information about the credit risk associated with that issuer and so forth, which is very valuable to the onboarding process. What’s happening now is there’s an opening of the eyes, a recognition of valuable data that’s resonant in different places inside the firm that can be connected.

GC: What are some of the barriers preventing firms from cross-referencing that data now?

SE: I think the biggest issue is that these different datasets are disconnected; they’re each in their own technology, each in their own format, each within their own places within a large organization. Absent the feeds of cross-referencing that these new identifiers provide, it’s very difficult to recognize that a particular entity or subsidiary—there might be thousands of subsidiaries associated with one overall ultimate parent corporation—it’s very difficult to compare and say which one is in one database and which one is in another database. The added benefit that you get because we have standardized identifiers is that you can start to be clearer when you relate the two together. It makes it possible, it makes it easy, whereas previously it was such an effort that very few did it.