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Increased regulation and immature processes pose the top challenges for financial firms in the management of client and legal entity data, according to a new study commissioned by The Depository Trust & Clearing Corporation (DTCC).

Published by the Aite Group, the study, “Putting the Client at the Center: Changing Dynamics in Client Onboarding and Data Management” explores the inefficiencies and challenges in the management of client or legal entity data, including processes related to onboarding, document management, and settlement processing.

Key findings from the study include

  • 82 percent of firms cite regulation as the driving force behind investment in, and improvement of, legal entity data management. Sixty-two percent of firms indicated risk management obligations as second on the list of drivers for investment.
  • More than 50 percent of firms are concerned about their entity data management processes when planning for the Markets in Financial Markets Infrastructure Directive (MiFID) II and the Market Abuse Directive (MAD) II which will require firms to store and report the legal entity data underlying their trades.
  • Almost 63 percent of firms do not see efficient onboarding processes as a competitive differentiator, although they acknowledge the inability to quickly create a new account can result in a loss of the opportunity to a competitor. Instead, they are more concerned with compliance and mitigating risk. Contrary to this, investing in onboarding processes can mitigate the need to reconcile data further downstream and reduce operational risk.

“DTCC commissioned this study to identify and examine the challenges siloed and legacy data management systems have created around data quality and governance,” said Ron Jordan, DTCC Chief Data Officer. “Further, the study highlights how firms are addressing current data management tasks while preparing to meet data management challenges of the future. This study aims to help foster further dialogue on data management and how the industry will leverage its potential in terms of growth, regulatory reporting and compliance, and risk mitigation in the future.”

In response to the industry’s call to reduce operational complexity and address evolving risk and regulatory requirements related to managing legal entity data, DTCC and six founder banks formed Clarient Entity Hub- the only service to leverage DTCC’s established set of client reference data services, including Avox and Omgeo ALERTsm. Clarient Entity Hub offers a comprehensive reference data solution providing control, standardization and transparency during the client onboarding process and ongoing client lifecycle events. Clarient Entity Hub will also be fully integrated with the DTCC Client Reference Data and Enrichment (CRDE) service, a portal to collect counterparty information required for delegated derivative trade reporting in support of EMIR reporting requirements.

The complete study including an overview of Aite’s key findings is available for download on the DTCC website: 

News release: DTCC Sponsored Aite Study Reveals Increased Regulations and Immature Processes as Top Concerns in the Management of Client and Legal Entity Data

Ed. note: Jordan will sit down with DTCC Connection to discuss the challenges of data management and DTCC’s role in helping the financial industry overcome those challenges in an upcoming issue of the newsletter.