Technology

RDM focuses on the management of reference data that is shared by several disparate Information Technology (IT) systems and groups. RDM is required to warrant consistent data elements between diverse system architectures and business functions. RDM is a static data discipline in IT that focuses on the data stewardship for your organisation.

In particular large financial institutions need a RDM solution as they often have IT systems that are used by diverse business functions (e.g., All FM, Risk, Credit, Treasury, Back Office etc.) and span across multiple geographic and business boundaries. These diverse systems usually need to share key data that is relevant to the parent company (e.g., products, customers, transactions and positions) and it is critical for the company to consistently use these shared data elements throughout the various IT systems. RDM is also important when two or more companies want to share data across corporate boundaries. In this case, RDM becomes an industry issue such as is the case with the Financial Markets and the required STP (Straight Through Processing) requirements.

The Reference Data repository is the definitive source of truth for static key corporate business entities, such as customers and products. The static data is managed within the repository construct to ensure that only changes to the data, which has been approved by the owning business structures, will be accepted into the main data stream. The RDM system will often provide automated checking processes, and when required will invoke simple workflow processes which require human interaction with the system to confirm and manipulate the data.

RDM is not only required to coordinate different trade systems static data, but also to supply necessary meta-data which supports the efforts of aggregating and integrating transactional data via a potential CDM. This use of RDM is necessary for Data Warehouse projects typically incorporated in Decision Support Systems. For this reason, RDM systems sometimes provide a meta-data abstraction layer, however in most modern implementations, particularly SOA, the CDM will be the superset for all data models participating in the integrated data enterprise.

The Reference Data repository construct is a part of the pre and post analysis of the CDM resulting from an initial Data Modelling exercise. The RDM will provide inputs to the modelling process, and is the primary data sink for the centrally managed business objects. This means that the requirements of the RDM repository have a major input into the structures of these objects when embodied in the data model.

In order that the business objects that form a part of the message payloads share common identification across the overall solution (i.e., that customer John Smith is recognised as the same person across each of the systems), a part of the data management process is to manage the cross-reference relationship of these common keys across the systems within the integration network, and potentially across the external enterprise boundaries.

Until recently it has been to costly and to time consuming to create a single source of data truth and as a consequence, financial market organisations use and compare multiple content sources and multiple business rules that are used for different divisions, front, middle or back offices as well as different locations. Financial institutions historically have not cleansed every security, focusing instead on the most heavily traded.

This approach while expedient has contributed to; reference data errors that can add at least 10% to banks operating costs, items such as trade execution errors or a missed corporate action are examples of reference data errors that add considerable cost to the business. Today margins have declined to the point of impacting the profitability of certain business lines however new regulations and compliance mandates has created the need for new approaches to risk and compliance that cross all asset class and locations of data.

It is the considered opinion of Lonispace that RDM provides a real step forward in satisfying the regulatory bodies while also reducing the error rate and hence the variable costs of banking transactions. It is critical when considering a RDM solution that the application chosen embodies a master data reference model that is extensible and supports appropriate and current data standards. (i.e. MDDL, FpML, ISO 20022, MT564/565 etc). Other must haves for the application are; that they provide a way to auto define and upload new products, price and customers plus counterparties, that the central reference data model can support both ETL upload and real time events, including necessary business objects and that the central reference model can provide assessment, validation, improvement and reconciliation of the enterprise data models.

Lonispace highly recommends the Asset Control range of products for all CDM/RDM applications in the financial services market. We have attached document overviews of their two solution offerings AC+ and TAPMaster, however if you require more in depth information please contact us by phone or email at info@lonispace.com.au or you can go to the Asset Control website and register to gain access to their brochures, news articles and whitepapers on data integration for the financial services market.