The explosive growth in OTC derivatives volumes is shaking up the data management processes in financial services firms, according to new research.

The survey, carried out by A-Team Group and commissioned by GoldenSource Corp., looked at trends in the management of instrument data and found that almost three quarters of respondents had, or were planning, to re-evaluate their data management processes because of the growing use of OTC derivatives.

It reported that 85% of the respondents cited derivatives/options when asked to identify the top five most difficult data types to source and manage. Structured products, including mortgage-backed securities, collaterized mortgage obligations, loan-level detail for structured products, and collateralized debt obligations for U.S. and European Markets, followed with 45% of the votes.

Other key findings of the report were: applying standardized reference data policies enterprise-wide remains a leading challenge; flexibility in data models and hierarchies for data selection are of growing importance in a competitive and increasingly complex environment; data terminals are in decline; and, industry-level collaboration on instrument data validation is desired, as 89% of respondents thought there was a role for industry-level peer-to-peer validation of base-level instrument data.

“In our discussions with survey participants we found that financial institutions unanimously recognize the need to establish enterprise data management, with standard data processes, practices, and controls to maintain firm-wide consistency, driven in particular by the requirements of risk management and regulatory compliance,” says Maryann Houglet, vice president of strategic consulting at A-Team Group. “However, they are still facing challenges in ensuring consistency and quality of the instrument data being consumed across the enterprise – particularly due to the growth in use of complex instruments such as OTC derivatives.”

“Complexity in the markets driven by the boom in OTC derivatives is reopening age-old problems such as securities identification and data linkage. This research confirms that a flexible data management platform is key to ensuring business growth remains unimpeded,” says Paul Kennedy, vp product management at GoldenSource.

The research is based on discussions with more than 40 senior individuals involved in reference data management at financial services firms. Geographically, the survey sampled respondents from around the globe, in particular from the U.K., mainland Europe (with an emphasis on France, Germany, Switzerland, and Benelux), the U.S., and Canada with the majority of respondents (78%) having global responsibility for data management.

http://www.thegoldensource.com/press_single.php?id=39&title=OTC%20Derivatives%20Wreak%20Havoc%20with%20Enterprise%20Data%20Management%20Strategies,%20finds%20A-Team%20Group%20Survey