FISD General Meeting

1
FISD General Meeting

• Michael Atkin
• December 11, 2003
• New York Mercantile Exchange

2
Thank You Sponsors

• Chicago Mercantile Exchange, Comstock, Gemini
  Systems, FT Interactive Data, Jordan Jordan,
  The London Stock Exchange, Moneyline Telerate,
  The NASDAQ Stock Market, Telekurs Financial and
  The Roberts Group

3
General Meeting Agenda

• FISD Operations
• Business Issues
• FISD Strategy
• VRXML
• Invoices and cycles
• Data usage (redistribution)
• Industry Roundtable (redistribution)Jack Sabo
  (NYBOT), Bill Lee (Morgan Stanley), Reg Pritchard
  (Rights Management)

• Securities Processing
• FISD Strategy
• Standards Activities
• Symbology
• MDDL Update
• Industry Roundtable (symbology)Mark Husler
  (LSE), Scott Preiss (CUSIP), John White (State
  Street), Rich Robinson (Deutsche Bank), David
  Silverman (Reuters), Tee Williams (Consultant)

4
FISD Recent Highlights

• Membership is growing (97 companies)
• Billing strategy well received
• VRXML being adopted
• Data usage/redistribution activity initiated
• MDDL 2.2 launched
• MDDL query, service and message specifications
  initiated
• MDDL Corporate actions underway
• MDDL vocabulary and 15022 2nd edition
• New FISD governance structure approved

• Reference Data Coalition (REDAC) working
• UII paper published
• IBEI/LEI discussions underway
• FISD named as direct liaison to ISO TC68/SC4
• FISD invited to serve on ISO WG 8 (business
  entities) and 11 (15022 data model)
• ASB modular contract finalized
• WFIC 2003 a success!
• Issue Briefs Series launched
• FISD visibility and influence is growing
• Liz Cummings joins staff

5
FISD Governance
6
2004 Meeting Schedule

• January
• Fourth Week ISO WG8-11 meetings (Frankfurt)
  FISD meetings (Amsterdam)
• February
• First Week Web Services on Wall Street (2/3-4
  FISD meetings (2/5-6) MDDL Steering Issue Brief
  (2/5) (NYC)
• March
• Fourth Week FISD General Meeting (Europe)
• April
• Fourth Week XML for Market Data Conference
  (April 27-28) MDDL Steering (NYC)
• May
• Second Week FISD week possible Issue Brief
  (California)
• June
• Second Week SIA Technology Expo (June 8-10)
  NYC FISD General, Working, Executive (6/10-11)
  (NYC)

• July
• Second Week FISD Week Issue Brief (Oslo)
• September
• Second Week MDDL Steering (NYC)
• Fourth Week FISD General Meeting ISO TC68/SC4
  meeting in (Korea)
• October
• Fourth Week FISD Administration Conference
  FISD Executive Committee (NYC)
• November
• Second Week FISD week Issue Brief MDDL
  Steering (NYC)
• December
• Second Week FISD General, working, Executive
  and Holiday party (NYC)

7
WFIC Outcome

• High marks from attendees and a financial success
• Keep roundtable and biennial format
• Greater focus on industry action and issue
  resolution
• More balance too US centric
• Beyond equities more on fixed income,
  derivatives, corporate actions, analytics,
  non-real time data
• Top areas for follow-up (in order)
• Symbology and instrument identification standards
• Billing standards and streamlining administration
  (VRXML implementation)
• Even more focus on requirements of customers
• A working data structure/model (MDDL
  implementation)
• Reference data standards
• Data normalization and quality assurance

8
Market Data Business Management
9
Business Issues Agenda

• Protect intellectual property rights
• Rationalize and reduce the cost of administration
• Simplify and automate market data procurement
• Improve the accuracy and efficiency of reporting,
  billing and inventory reconciliation
• Address the policies and procedures related to
  market data usage to promote global electronic
  commerce

10
Summary of FISD Billing Strategy

• Practical recommendations based on the results of
  the FISD workshop
• Payment processing before procurement
• Three fundamental objectives
• Simplify reporting (formats and requirements)
• Promote data consistency
• Simplify and rationalize business rules
• Progress will be incremental and administrative
  processes are interrelated

11
FISD Billing Strategy

• VRXML to become the global standard reporting
  format (exchanges and vendors)
• Standardize data elements into the VRXML glossary
• Precision, transparency and consistency
• Standard naming conventions are needed
• Controlled vocabularies can be supported
• Document all reporting validation rules
• VRXML schema has validation rules
• Promotes (but does not require) greater
  uniformity
• Business rules repository under consideration

12
FISD Billing Strategy

• Modify VRXML as the global invoicing standard
• Exchanges as well as vendors
• Automatically map to inventory to simplify
  reconciliation
• Synchronize reporting cycles
• Eliminate confusion about what the invoice
  represents
• Users want - monthly, in arrears, uniform snap
  date
• Significant commercial and operational obstacles
  to overcome
• Strategy has been verified by FISD members

13
Status of VRXML

• Adoption is better than expected!
• Eight exchanges are taking a serious look
• Six vendors are in the process of reporting to
  NYSE
• Five investment banks are working on direct
  reporting
• Three inventory system providers can generate
  VRXML reports
• IPUG meeting in last week London
• VRXML mapping and implementation assistance by
  FISD and Gemini (Fast Track)
• VRXML - standard management
• Glossary Committee being formed
• Change management procedures being defined
• FISD is registration agency and maintenance
  authority

14
Next Steps

• Electronic invoices
• VRXML reports from both exchanges and vendors
• Common format for mapping into inventory systems
  for easier reconciliation
• Flowchart of where VRXML can be used throughout
  the administration cycle is needed
• Standardization of billing and reporting cycles
• Much more difficult than VRXML implementation
• Cycles are linked to internal systems and
  processes
• Strong business case to vendors is needed

15
Next Steps

• Lots of interest in direct reporting and billing
• The procurement side of the equation
• Account set up and authorization
• Contractual issues
• Standard naming conventions
• Market data business issues are heating up
• Data usage policies (redistribution and derived
  works)
• Subscriber and click on agreements
• Units of count and multiple access fees
• Enterprise licensing

16
Market Data Usage and Redistribution
17
Redistribution Roundtable

• Top issue development of policies, procedures
  and business models related to distribution and
  usage
• Top challenge - controlling market data
  redistribution in datafeed environments
• Shared objective protect intellectual property
  rights and promote widespread (legitimate) data
  redistribution

18
Whats the Problem

• Vendors dont have control over downstream
  redistribution in datafeed environments
• Policies are complex with lots of varieties
• Compliance is covered by contracts that are open
  to interpretation
• Compliance involved many people that dont always
  know about or understand the practical side of
  market data rules

19
Goals of Roundtable

• Define the categories of redistribution(financial
  institutions, web sites, electronic trading
  engines, derived data)
• Clarify the issues (contractual/licensing,
  communication and compliance, entitlement
  control, business models)
• Identify the path forward (define the areas of
  common interest between information producers,
  distributors and consumers and prioritize the
  range of practical industry responses)

20
Securities Processing Automation
21
Securities Administration Strategy

• Provide a mechanism for coordination and a common
  global voice on the information infrastructure
  requirements for STP
• Make sure FISD members have a strong and well
  coordinated voice in all relevant standards
  setting discussions
• Ensure that the MDDL specification and vocabulary
  are comprehensive for all asset classes and
  technical applications
• Coordinate and ensure MDDL compatibility with all
  other major XML initiatives (particularly the
  15022 Data Field Dictionary)

22
Securities Administration Agenda

• Reduce the information-related costs associated
  with global trade processing automation
• Address the requirements for unique and precise
  instrument identification (front and back
  office)
• Define the legal and business identification
  requirements to improve post-execution trade
  processing capabilities
• Establish common names, values and relationships
  for all data used throughout the financial
  information lifecycle to promote reference data
  transparency and interoperability
• Establish a standard XML format for efficient and
  extensible data exchange (static and dynamic)

23
The Standards Landscape
Ownership Stake
Telekurs
American Bankers Assoc. (ABA)
SP
CUSIP
Contracts
Maintains
ISO Standards
Part of ISIN
Local Identifiers(65 in total)
LSE
DB
SEDOL
CFI
ANNA
DUNS
Maintains
Developed
Ownership Stake
Registration Authority
BSI (UK)
ISIN
Business Entity Identification
Legal Entity Identification
Instrument Identification
ISO
ASB
SWIFT(Network)
MIC
US Representative to ISO
RDUG
REDAC
SWIFT(Reg. Authority)
BIC
Registration Authority
Facilitation
TC68
ANSI X9D (US)
SIIA
15022
Agreement to make ISO 15022 XML Aware
Membership
WG11
FIX Protocol Limited
WG10
CFI
WG10
TBMAAMF
ConvergenceISO 15022 XML
FISD
Adopting
Membership
Owns
Omgeo
Recommenda-tions
ISDA
FIX
ALERT
Developed
Adopting
Owns
Membership Involvement
ISTIC-IOA
Developed
Standard (Reference Data or Message)
XML Conformance Standards
OASIS(XML Conformance Standards)
MDDL
FpML(Derivatives)
XML Conformance Standards
Organization
24
How to Move an Industry

• Definition of issue (is it clearly defined?)
• Agreement among participants (do we have buy-in?)
• Strategy and metrics (is there a shared view on
  how to solve that are operationally/commercially
  viable?)
• Alignment of interests (do we have agreement
  among involved parties?)
• Implementation management (can we herd the cats?)

25
Status of UII

• Requirements have been defined and validated by
  the industry
• The London Stock Exchange is adjusting and
  extending SEDOL to meet the requirements
• The ANNA Service Bureau is adding OPOL and Place
  of Trade data to the ISIN feed (so the rumor
  goes)
• There are ongoing rumors about the potential
  commercialization of RIC codes
• Are multiple approaches to addressing the
  challenges of multiple listings a problem?

26
Status of IBEI

• Defining the interrelationships between legal
  entities, issuers and products are needed to help
  firms manage risk and meet regulatory obligations
• There is no standard identification scheme for
  legal entities
• Distinction between a standard identifier and how
  it gets used to understand business entity
  hierarchies
• ISO TC68/SC4 has established Working Group 8 to
  create a standard identifier
• Is this practical and realistic?
• The standard becomes a building block -- but some
  entity must assign the number and maintain the
  standard
• Whats wrong with DUNS Numbers?

27
Status of LEI

• International standard identifiers linking legal
  entities, issues, funds and counterparties are
  needed
• Two identification challenges
• Identification of legal entities (limited
  universe)
• Identification of funds (private pools of money)
• Multiple applications
• Account set-up (scope of entities you do business
  with)
• Transactions processing (counterparty
  communication)
• Trade allocation and settlement (electronic
  allocation via FIX)
• Regulatory compliance (KYC and AML procedures)
• Operational risk (group entities to assess
  exposure Basel II)

28
Status of LEI

• Business entity relationships are critical
• Discussions are underway but industry consensus
  on problems to solve does not exist
• The business case is missing (anecdotal)
• STP makes this more important (not enough current
  pain)
• Multiple relationships complicate the issue
• OMGEO Alert and SID
• Trade Web
• ISO WG8 (IBEI)
• FIX 4.4
• Crosswalk (SP/Telekurs/DB)

29
Data Model and Vocabulary

• Standard information architecture is the
  foundation of reference data management
• Common data format makes processing more
  efficient (reduce the cost of data translation
  and normalization)
• Common understanding of financial instrument
  attributes are needed (terms, definitions and
  relationships)
• Market Data Definition language (data elements
  required to setup and price securities)

30
ISO Working Group 11

• Data model and vocabulary
• Define the business model and relationships
• Define the messaging requirements
• Generate physical message formats
• Central repository for all terms, definitions and
  relationships
• Compatible with 15022 2nd edition

31
Market Data Definition Language (MDDL)

• James Hartley
• FISD Chief Technologies
• MDDL Architect

32
Symbology Roundtable

• Twin objectives of cost containment and risk
  mitigation
• Symbology means precise, consistent and
  transparent identification
• Vendor codes for information retrieval
• Ticker symbols for listed instruments
• Numbering schemes for trade processing
• Legal entities for account management and
  regulatory reporting
• Roundtable goal determine whats required to
  streamline the processing of transactions from
  trade execution to settlement?