FISD Update: General Report to the Membership

This Update is a periodic summary of active FISD projects. Additional information and specific reports are available via http://www.FISD.net, http://www.MDDL.org and http://www.VRXML.org. FISD is a membership organization and these projects are being managed on behalf of our members. If these issues are important to you, please consider joining and taking a seat in the FISD forum. Membership information is available on the web

Table of Contents

1. World Financial Information Conference
2. FISD September Meeting in Europe
3. Liz Cummings joins FISD staff
4. Billing and Reporting Strategy Defined
5. User Firms Coalesce Around Monthly Billing Cycles
6. VRXML Adoption
7. FISD Files Comment with SEC on Sub-Penny Increments
8. ASB Modular Contract Finalized
9. Reference Data Coalition (REDAC) Formed
10. FISD to Coordinate SEDOL Testing for LSE
11. REDAC/RDUG Paper on Unique Instrument Identification
12. Business & Legal Entity Identification Discussions Underway
13. FISD Named as Direct Liaison to ISO TC68/SC4
14. MDDL Specification Extended
15. mddlQuery, mddlService, and mddlMessage Specifications Initiated
16. MDDL Streaming Demonstration Planned for WFIC
17. Standard Symbology for Cash Markets Under Review
18. New Issue Brief Series Launched
19. FISD Latin America Under Consideration
20. SIIA/FISD Launch new Jobs Board

1. World Financial Information Conference in Washington DC

Planning for the 6th World Financial Information Conference (WFIC) is almost complete. This year’s event, titled Product and Business Strategies for the New Market Data Industry, will take place October 14-16 at the Fairmont Hotel in Washington, DC. The program will examine the regulatory, technological, competitive and operational drivers of the business transformation currently underway within our industry - and project what they will mean for the economics of our business, the definition of business roles and the product strategies of affected organizations. Early registration discount expires September 15. Full program details and online registration are available on the WFIC Website.

2. FISD Meeting in Europe September 3-5

The next FISD General Meeting is scheduled for September 3 at Citigroup London. The meeting will be held from 14:00–17:30 with a networking reception immediately following. The agenda will be exclusively oriented on the status and direction of active FISD projects and activities. In addition, James Hartley and Michael Atkin are looking to schedule one-on-one meetings with interested members – September 3 between 08:30 – 13:00 (London). September 4 between 12:30 – 18:00 (London). September 5 between 08:30 – 18:00 (Frankfurt). Full details and online reservations are available on the FISD web site. To schedule a private meeting, please contact Michael Atkin (e) matkin@siia.net (p) +1 202-789-4450.

3. Liz Cummings Joins FISD Staff

FISD is pleased to announce the hiring of Elizabeth Cummings as FISD Project Manager. Liz replaces Tom Andresen and is responsible for the FISD database, website publishing, membership development, meeting coordination and project management. Members should view Liz as the primary contact for all FISD member service requests. Her contact information is (p) +1 202-789-4452 (e) ecummings@siia.net.

4. Billing and Reporting Strategy Defined

The goal of FISD’s billing and reporting project is to reduce the cost and burdens associated with administration and improve the accuracy and efficiency of payment processing. The FISD strategy addresses three core activities: The first deals with simplifying reporting requirements and reducing the number of formats being supported by the industry. The second deals with ensuring the accuracy of reporting (particularly in light of our tri-party industry delivery and payment processing structure) by coordinating billing and reporting cycles and standardizing the data elements and vocabulary of billing so that inventory reconciliation and payment processing can be done in a more automated manner. The third relates to ensuring that market data business policies are easy to administer and rational.

Our strategy is to use the activities associated with VRXML as the mechanism for making incremental progress on the spectrum of administrative priorities. We see the potential for VRXML to become the standard reporting format for the industry as well as the standard billing format for electronic invoicing. We believe that the standard glossary associated with VRXML can help eliminate confusion about the content of the data transmitted. And we like the fact that VRXML is extensible – making it easier for the industry to adopt existing and new reporting requirements, incorporate them into systems and reduce programming expenses.

FISD is in the process of drafting a full document outlining the strategy and tactics associated with billing and reporting improvements. In the meantime, please feel free to review the working documents in the billing section of the web.

5. Coordination of Billing and Reporting Cycles

One of the dimensions of billing process improvement deals with the challenges of synchronizing reporting and invoicing cycles. During our recent discussions, one clear message from user firms was the need for consistent data to improve the efficiency of end-of-month and end-of-year processing. Synchronized cycles would help ensure that the data that is passed between players is consistent. On one side of the ledger, the goal is to eliminate confusion about what data is represented by the invoice – and ensure that all parties are reporting the same cycle. On the other side, firms are looking to streamline the production of internal reports and need a consistent basis for the business units to make activity decisions. The overall objective is to ensure that the data that gets passed from user firms to vendors, exchanges and third parties (and back again) is consistent.

In order to address this, FISD did a survey of user firms. The survey went to 150 people within 70 firms in the US and Europe. We got 38 responses from 24 firms. The survey asked firms how they currently prepare reports, asked them for their preferences and asked them to define and rank the sources of frustration with reporting. Our focus was on the frequency of reporting, the usage periods and how reports are generated.

No real surprises – just empirical evidence. Reports are produced at various frequencies and at different times of the month/quarter – there is no existing standard. Most firms want reports to be submitted by the 15th of the month – meaning that 2 weeks to reconcile appears to be sufficient. Usage periods are governed by contracts and vary widely across the industry – although if they had their preference, over 80% want the usage period to be a calendar month. This is just the starting point, the challenge now is to figure out the implications of cycle unification on exchanges and vendors – and to determine whether this initiative is practical, viable and reasonable.

6. Interest in VRXML Continues to Grow

FISD members are taking a serious look at the benefits of VRXML. We are aware of some 16 members (including a roughly equal mix of exchanges, vendors, facilitators and investment banks) that are either actively programming to send/receive VRXML reports or evaluating the potential of VRXML as a standard reporting format. Much of the activity is still in development and not ready for prime time – we’ll publicize the entities engaged when authorized to do so. Don’t forget – FISD is still available on a free consulting basis to help members implement VRXML. For more details contact Michael Atkin.

7. FISD Files Comment Letter on Uniform Trading Rules

FISD filed a letter in response to the Security & Exchange Commission’s request for comment relating to the regulation of Nasdaq-listed securities. The letter emphasized the challenges associated with sub-penny quoting and trading and its potential impact on market data traffic and capacity. A copy of the FISD letter is posted on the web.

8. ANNA Service Bureau Contract Finalized

After months of negotiation between market data vendors, the ANNA Service Bureau and the members of the Association of National Numbering Agencies – we are pleased to announce that all parties have agreed to the language of a standard modular contract. The modular contract consists of a core license with the possibility of adding separate addenda for NNA’s that currently require (and wish to maintain) additional licensing terms/conditions. The purpose of the modular contract is to centralize the contract administration process and to make contract terms and conditions as consistent as possible. It also creates a foundation for ongoing discussions about business models, further administrative simplification and data usage requirements.

9. Reference Data Coalition (REDAC) Formed

The timeliness, accuracy and integrity of global reference data is of fundamental importance to address the risk management and cost mitigation objectives associated with straight through processing. Because of its importance, a significant number of firms and industry groups have agreed to work together under the auspices of FISD to define the core issues and challenges associated with reference data.

The group, known as the Reference Data Coalition (REDAC), is working to define the data elements (and the essential industry standards) needed to precisely describe assets and account entries required for global trade cycle processing. REDAC, under the leadership of Steven Kelly (Goldman Sachs) is working in cooperation with the UK Reference Data User Group, the Securities Industry Association, ISITC and others to resolve the information needed for instrument, client/counterparty, trade specific and accounting identification. Details are available on the reference data section of the FISD web site

10. SEDOL Testing Coordination

The London Stock Exchange has released a rollout strategy for their new Security Master File Product. The “go live” date is scheduled to be 26 January 2004. A number of user firms have asked FISD/REDAC to help coordinate testing among interested participants to make things as efficient as possible. FISD is working to ensure that data vendors use consistent data sets to ensure that organizations that subscribe to multiple data vendor feeds are able to test all systems in a simulated live environment. More details are available via the SEDOL testing section of the FISD website. Data vendors and institutions interested in participating in the testing process should contact Michael Atkin as soon as possible.

11. Joint REDAC/RDUG Paper on Unique Instrument Identification Published

FISD (as manager of the Reference Data Coalition) and the UK Reference Data User Group (RDUG) have jointly published a discussion paper outlining the requirements for unique and precise financial instrument identification. The issue of unique instrument identification has become a critical requirement to improve the efficiency of securities transactions processing and is required to meet the automation objectives associated with straight through processing (STP). A copy of the joint paper is available via the FISD web site.

12. Business & Legal Entity Identification

The issues associated with defining the interrelationships among entities, issuers and products are heating up – but there are multiple issues at work in this discussion and all the dimensions have not been fully agreed to by industry participants. At a minimum, there is agreement that establishing the correct links between legal entities is an essential part of starting a new counterparty relationship as well as a regulatory requirement associated with know your customer (KYC) and anti-money laundering (AML) activities – and an operational risk obligation associated with the Basel II accords. . Not only do market participants need to be able to identify each other’s business entities, they need to identify individual funds as part of the post-trade allocation process. In addition, firms want to link multiple securities in their master files to the issuers of those securities in a standardized way.

However, there are at least two sides of this discussion. The first deals with risk management and the fact that firms have a difficult time doing compliance research on legal entity relationships. The second deals with fund entity identification and the challenges of doing cross-referencing between proprietary internal account numbers among counterparties. FISD/REDAC is working with RDUG, ISITC and ISO TC68/SC4 to further define the issues associated with common identification systems for business and legal entities. A summary of the business and legal entity issues has been posted to the FISD web site.

13. FISD Becomes Direct Liaison to TC68/SC4

FISD has been named as a “category A” liaison to ISO Technical Committee (TC) 68, Subcommittee (SC) 4. TC68 is the ISO group dealing with standards for financial services. SC4 is the group dealing with standards issues affecting the securities industry.

There are various working groups under this structure of importance to FISD members. Working Group 10 is reverse engineering the 15022 specification into XML. Working group 11 will be creating a data model for the securities industry as well as standardizing market data vocabulary within the 15022 data field dictionary (using MDDL as the basis for the common vocabulary). Working group 8 will be addressing issues related to international business identification standards. As a direct liaison, FISD members have the right to participate in working groups and exercise influence over the standards setting processes.

14. MDDL Specification Extended

The current release of MDDL - 2.2 Beta as of 15 August 2003 - contains basic setup and pricing information for all asset classes of interest as expressed by members (to date). MDDL 2.3 is being developed for release in September and will focus on adding Corporate Actions and Events. It has been requested that Risk and Portfolio support be added to MDDL 2.4 in the 4th quarter. As always, MDDL will continue to refine its vocabulary and specifications in direct support of members who are actively implementing MDDL-based products. A reassessment of content priorities will take place in September to ensure our activities are consistent with member goals - your input is requested! More information is available via the MDDL web site.

15. mddlQuery, mddlService, and mddlMessage Specifications Initiated

As organizations move to adopt MDDL, they have insisted that MDDL be augmented with standards for a query mechanism and a protocol convention (to exchange the mddl documents). MDDL was originally envisioned as a way to distribute market data information from a provider to a consumer of that information but does not specify how a consumer indicates which information is of interest. Further, MDDL does not dictate how the request is delivered nor how the response document is transferred to the consumer.

The 'mddlQuery' specification defines the "query" functionality to complement the "response" nature of 'mddl'. The 'mddlService' specification defines the interactive protocol (e.g. web services) for requesting and receiving MDDL-based "static" data while 'mddlMessage' defines the messaging protocol for efficient realtime streaming of MDDL-based market data. These specification documents are currently being written with betas to be released mid-September. Please contact James Hartley if you have requirements or other input for these specifications.

16. MDDL Streaming Demonstration Planned for WFIC

FISD is in the process of crafting software to combine the four principal MDDL specifications into a cohesive set of capabilities showing the viability of using XML within a reference market data system. A demonstration based on this software, to premiere at the 6th World Financial Information Conference in Washington D.C. on October 15, will showcase MDDL-encoded reference data - combined with efficient MDDL-encoded realtime streaming updates - in a reality based scenario from datafeed to display application. Opportunities for sponsorship of this demonstration are still available. For more information, contact James Hartley.

17. Standard Symbology for Cash Markets

Interest has resurfaced on the concept of standardizing naming conventions for the cash markets (e.g. money markets, foreign exchange, fixed income, OTC derivatives) to improve operating efficiencies and reduce costs. As it stands, there is no standard method for constructing symbols making it difficult for vendors/firms to share or normalize the data among companies and across departments. A number of FISD members have approached us to facilitate the dialogue with the goal of developing an open standard methodology on how to construct symbology for cash markets. The initial meeting will be held in September. For more information, please contact Michael Atkin.

18. New Issue Brief Series Launched

Under the leadership of new FISD chair Tom Davin (Nasdaq), FISD recently launched a new series of meetings for members. The Issue Brief meetings are designed to bring FISD members together around a significant topic within the industry. The inaugural meeting was organized around the concept of disintermediation in the market data industry and was well received. The outline of the issues under debate is available on the FISD web site Look for the next meeting in mid-September. And outline

19. FISD ‘Latin America’ Under Consideration

A number of members have asked us to consider an outreach program to bring the Latin American markets into FISD (similar to the way we approached Eastern Europe). Our current plan calls for a Latin American meeting in mid-late March 2004. Please send an indication of interest to Liz Cummings at FISD.

20. SIIA/FISD Jobs Board Now Available

SIIA has developed a new jobs bulletin board organized by category (including a number of relevant market data categories) and searchable by an array of criteria. Posting a resume and looking over available jobs are FREE. Posting an available position runs about $125/month. Check out the SIIA Jobs Board on the FISD web site