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Nov 11, 2014 • Press Releases

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

80 Percent View Derivatives Regulation and FATCA as Greatest Operational Challenges

New York/London/Hong Kong/Singapore, November 11, 2014 – Increased regulatory requirements and related penalties, along with immature and fragmented data management processes are ranked as top concerns for financial firms in the management of client and legal entity data, according to a study published by Aite Group and commissioned by The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry.

According to the study, 80 percent of respondents believe global over-the-counter (OTC) derivatives regulation and the Foreign Account Tax Compliance Act (FATCA) pose the greatest operational challenges for entity data management processes due to the numerous checks and classifications that need to be applied to legal entity data. With data management processes fragmented and immature, and over-reliance on manual onboarding processes, most firms anticipate investment in data management to be one of the highest technology investments they will have to make in the coming years.

Over two thirds (69 percent) of firms indicated that data quality and the need for defined governance processes for entity data management were of greatest importance when meeting investor transparency and regulatory reporting obligations. Furthermore, 56 percent of respondents said they plan to establish a single client masterfile as a means of staying ahead of the next wave of regulations. Additionally, over 88 percent of respondents are considering a utility model to simplify and standardize the client onboarding and lifecycle management process.

Virginie O’Shea, author of the Aite Group study, said, “It is worrying that 70 percent of firms are still using legacy manual processes to onboard clients, exposing themselves to increased costs and operational risk. The tide is however changing with regulatory requirements and fear of penalties among the key drivers. There is an increasing focus on streamlining processes that can support legal entity data in a holistic way, from client onboarding all the way through to settlement processing.”

Other 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. 62 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.

Ron Jordan, DTCC Chief Data Officer said, “Siloed and legacy data management systems have created challenges around data quality and governance which could prevent firms from meeting regulatory requirements and lead to penalties, loss of business and reputational damage. Increasing costs related to poor data management continue to be a significant and growing concern for these firms.”

Aite Group surveyed 23 market participants from the onboarding, data management, and settlement operations functions across 16 financial institutions based in North America and Europe.

The complete Aite Group study, entitled “Putting the Client at the Center: Changing Dynamics in Client Onboarding and Data Management” is available on the DTCC website.

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Note to Editor
The findings of the study are based on surveys conducted with market participants from 16 financial institutions. During the month of August 2014, Aite Group interviewed 23 individuals, representing U.K. and North American-based firms, including asset managers, third-party administrators and investment banks, to capture their views on client data management strategy and challenges inherent in onboarding processes and ongoing data support. Given the size and structure of the research sample, the data provide a directional indication of conditions in the market.

The complete Aite Group study, entitled “Putting the Client at the Center: Changing Dynamics in Client Onboarding and Data Management” and a summary of the study’s findings are available for download on the DTCC website.

About DTCC
With over 40 years of experience, DTCC is the premier post-trade market infrastructure for the global financial services industry. From operating facilities, data centers and offices in 15 countries, DTCC, through its subsidiaries, automates, centralizes, and standardizes the post-trade processing of financial transactions, mitigating risk, increasing transparency and driving efficiency for thousands of broker/dealers, custodian banks and asset managers worldwide. User owned and industry governed, the firm simplifies the complexities of clearing, settlement, asset servicing, data management and information services across asset classes, bringing increased security and soundness to the financial markets. In 2013, DTCC’s subsidiaries processed securities transactions valued at approximately US$1.6 quadrillion. Its depository provides custody and asset servicing for securities issues from 139 countries and territories valued at US$43 trillion. DTCC’s global trade repository processes tens of millions of submissions per week. To learn more, please visit or follow us on Twitter @The_DTCC.

About Aite Group
Aite Group is an independent research and advisory firm focused on business, technology, and regulatory issues and their impact on the financial services industry. With expertise in banking, payments, securities & investments, and insurance, Aite Group’s analysts deliver comprehensive, actionable advice to key market participants in financial services. Headquartered in Boston with a presence in Chicago, New York, San Francisco, London, and Milan, Aite Group works with its clients as a partner, advisor, and catalyst, challenging their basic assumptions and ensuring they remain at the forefront of industry trends.

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