Donald F. Donahue, DTCC President and CEO, recently addressed audiences on the topics of data management and the outlook for market infrastructures globally.
He gave the keynote speech at the Insurance Data and Analytics Summit on April 25 in New York and he addressed the Americas’ Central Securities Depositories Association (ACSDA) General Assembly in Cartagena, Colombia, on March 29.
Here are excerpts from both speeches.
Insurance Data and Analytics Summit: The Gold in the Data Hills: Mining It, Refining It and Using It
When Hollywood starts making movies like Moneyball, which, as you probably know, is about the business of refining and using data to get a competitive advantage in the world of professional baseball, it’s clear that data is the new gold. What happens in Moneyball is that the quants in the back room, rather than the old-line managers, start calling the shots based solely on data—and the team improves dramatically.
One reason there’s more interest today in analyzing data is probably that there is simply so much more data available. As you know, because your business is data-based, we’re witnessing a huge explosion in data collection. Courtesy of today’s technology, we are able to collect and store more data today than ever – vastly more. We have it in such volume that we can group it into “meta data” or “big data.”
The question is how to use all this data to improve the information flow to and from our customers, our investors, our markets, our regulators and the broader marketplace. How can we use the data to help understand the kinds of risks that are evolving in our markets? What kinds of new products and services can we offer our clients based on the data to help them in their own businesses and activities?
Donald F. Donahue, DTCC President and CEO
Of course, data without understanding, without analysis, is just raw material. To make data useful the way the Brad Pitt character uses it in Moneyball to remake a team, the data has to be analyzed, thought through and turned into information—with intelligence about what it means and what conclusions it suggests.
Turning data into information, and finding ways to help our clients and their customers understand what the data means and how to use it, is becoming a major adjunct to our business. In fact, while DTCC has always been a transactions business, the value we add now lies increasingly in how we leverage the data we derive from those transactions… and in how we mutualize access to and the costs of core databases in order to deliver to our clients market intelligence, risk control, compliance solutions and cost reductions.
ACSDA: Market Infrastructure Outlook For 2012 and Beyond
In the current era of newer global markets, there is universal support for addressing the roots of a source of global regulatory anxiety – the lack of transparency in the world’s swaps and derivatives markets.
Years before this became a regulatory worry, DTCC began building repositories to capture and retain data from the over-the-counter swaps markets. We created our first repository primarily to help our participants in the industry track, consolidate and maintain their swaps data.
But it didn’t take long for the industry – and regulators – to realize that having a central repository is key to bringing transparency to the swaps derivatives markets. When data is consolidated in a central repository, market positions and concentration of risk can become fully transparent, providing regulators and policymakers, in particular, with a big picture view as well as immediate access to accurate underlying specifics that will enable them to make better and faster decisions.
Last year, to provide greater transparency for these markets and make it much more accessible for regulators to track credit default swaps [CDS], we built a special “regulators portal” into our Trade Information Warehouse, a repository for CDS. This portal gives global supervisors direct electronic access to comprehensive transaction data on virtually any CDS trade executed worldwide in which they have a material interest.
Today, some 40 regulators around the globe are actively using this portal to monitor systemic risk, and the upshot is that the CDS market, once considered murky and difficult to penetrate, is now considerably more visible to both market overseers and market participants generally. We are now building extensively on this experience. We currently operate trade repositories for interest rate and equity derivatives, and will launch repositories for foreign exchange and commodities derivatives in the coming months. [See article on the rollout of these repositories.] We are also in discussions with regulators around the world as we expand the portal to these asset classes. We encourage you to get your regulators engaged.
The lesson to be learned here is that beyond centralizing data storage, it’s a good idea to have a centralized effort to create legal entity identifiers and a global effort at standardizing operating princip-les for financial markets everywhere. @