The Bond Market Association has been working closely with the FISD to develop a data dictionary leveraging the MDDL standard.
Receiving market data from multiple vendors, cleansing, organizing and ultimately feeding that data into applications is a complicated and costly task for any financial-services firm. And as XML-based standards are spreading throughout the industry, market data is one area that could benefit largely from such standards. In line with the industry acceptance of XML, the first working version of the Market Data Definition Language for equities was officially released last fall.
Moving forward with that standard, MDDL is now extending beyond equities and into the fixed-income world as the Financial Information Services Division of the Securities Industry Association has been working with the Bond Market Association to create a securities-master database, or data dictionary, to define fixed-income-data attributes leveraging the MDDL standard.
"When we did this exercise for the equity space last year we didn't have as much buy in and we didn't solicit as much involvement from other groups because we were in new territory," says John Bottega, director, enterprise data standard initiative in Merrill Lynch's Global Markets and Investment Banking group. "But with the success of the first version, we're talking with people now who have solid backing and are realizing the benefits across the different groups."
In theory MDDL is made up of two components, a common XML schema and a common glossary or dictionary of terms and meanings relating to financial instruments or asset types, corporate events, corporate-action information and indicators such as indexes and exchange statistics. "We're trying to take every element of market data and define what it is at a very granular level," says Mike Atkin, vice president of the FISD. "It's kind of like (how) the Oxford English Dictionary is the taxonomy for the English language."
This common-data dictionary is important when processing trades, for example, because when a transaction takes place, both parties need to know a closing price or the last sale and the security identifier in order to complete the trade. "It's not standardizing the way the industry does its business, it's simply standardizing what you call it and making sure that the definitions are agreed and known," says Atkin.
Bottega says that financial firms are incurring significant costs because of the lack of a standard due to the repetitive work that must be done to bring in data from various sources in various formats. "If there's one trend going on in the financial-services industry, it's the movement to efficiency, and standards are the key to efficiency," adds Atkin.
When this data dictionary is applied to the fixed-income side, those data points extend out to maturity rate, coupon rate, etc, which can vary from firm to firm and even department to department within a firm, explains Bottega. "And if you're going to move towards an automated process of moving data from point to point, you have to come to an agreed upon standard and that is the biggest piece of what MDDL is presenting," he adds.
But firm-to-firm processing isn't the only aspect that creates data complications. "From a commercial standpoint, every single market-data vendor today has its own accent - the way they sent it, the format, what they call things," says Bottega. "So Merrill Lynch as a receiver of data, for example, has to write separate code and separate analysis for every single vendor we get in. But if we can reach the point where every market-data vendor sends me the same formatted data, now my focus is on the content and not worrying about how it's formatted and what the definitions are and so forth."
Bottega explains that the data dictionary takes into account both internal and external communications and processing in order to reach a consensus. "You can start internally from department to department - how do I pass a trade to the next department? And then we look at the business-to-business automation, so how does Merrill Lynch, for example, talk to its clients? And then from the data-acquisition perspective, how do the market-data vendors sell their data?" he says.
The standardized MDDL-data dictionary not only puts everyone on the same page in terms of the data points for delivery and transaction processing, it also saves financial firms time and money. "We won't have to spend hours and hours, like we do today, asking do they mean maturity data or maturity type? Do they mean it's six digits or eight digits?" says Bottega. "There's a huge amount of time and money spent doing that and this would move toward eliminating that."
The BMA was working separately on a securities-master-database initiative to standardize bond-related data when they became aware of the FISD's MDDL work. "We have a content working group that is responsible for definitions of the attributes describing fixed-income instruments and that group is nearing completion of their work," says Joseph Sack, executive vice president of the BMA and staff advisor for the Online Bond Steering Committee, under which the data projects fall. "A few months ago we met with the FISD and realized that what we're doing is somewhat similar."
Merrill's Bottega adds that the BMA work was a natural fit with the MDDL initiative because, the "BMA are experts in bonds and they're going to define it because they know what they need to work with and we have a global presence and can incorporate the vendor taxonomy as well." The ISO 15022 data dictionary will be the repository for the fixed-income-definition work.
Sack explains that while the FISD use of MDDL in the bond area will probably cover a broader field beyond basic bond descriptions for the securities-master database and into corporate actions, the basic descriptions are a good starting point for the FISD. "We're going to let the MDDL group at the FISD take (the) definitions that we (are developing) for the (securities-master database)," says Sack. "There's no reason for them to produce X and for us to produce Y, so we've agreed informally that our attributes and the definitions will be the same under the MDDL initiative."
With those definitions, though, the BMA will move in a different direction to launch a portal for accessing all information related to new issues. "In order to do this we needed to first define the attributes of the various fixed-income-securities fields that relate to bond descriptions, such as CUSIP, yield and all of the basic terms," says Sack. He adds that the list for those terms can be up to 250 fields long for certain types of municipal securities. The BMA expects to have the portal up and running by the end of the year, but the launch will be dependent on industry consensus.
"It's important to have a common standard for the descriptions if you happen to be an underwriter and you have 200 different people calling you from all over the place asking for the securities descriptions," says Sack. "With the portal, instead of having to give a variety of deliveries of the description of the deal, there will be one format so the underwriter can refer all of the inquiries to the portal and say there's one format and the information is all in one place."
Getting the Vendor Support
So with the FISD and now the BMA working to standardize equity- and fixed-income-data dictionaries, will the vendors be supportive of the standard?
Merrill Lynch's Bottega says that vendors have realized success comes down to content, not format, moving forward. "One vendor over another will win its client based on the quality of content. I think the vendors realize that (they need) to improve their competitiveness. If there's a standard-process protocol for delivery, they can start to focus (on that to improve) their content," he adds.
Atkin adds that a standard format will also enable vendors to more efficiently combine, repackage and deliver data across all of their assets and data products to deliver information based on client needs. "It allows vendors to extend their products and create new value-added, customer-centric products," says Atkin. The end-user demand will also leave vendors no choice but to get on the MDDL bandwagon, he adds. "It's more efficient for an end user to get their data in a common format so that will be a big driver for the industry."