Data always beats opinion

Without the data to provide the facts, decisions are based on assumptions. That’s why managing financial instrument data is key to the work we do at Vontobel.

Apart from processing data correctly, in full, and on time, you need to understand exactly in which processes the data is used in the target systems and for what purpose. Only then can you start to use rules, validation processes, and pattern recognition efficiently and begin to reap the rewards of constant automation.

Data management for financial instruments: challenges and opportunities

At Vontobel, accurate, reliable data management is essential to ensuring informed decisions, risk mitigation, regulatory compliance, and efficient processes. Due to the complex nature of financial instruments and the fact that the legal and regulatory framework is constantly evolving, managing reference and static data for financial instruments is particularly challenging. Rule-based validation processes and pattern recognition are two approaches Vontobel uses to overcome these challenges.

When it comes to data, we focus on accuracy, completeness, consistency, and standardization, ensuring quality and compliance with legal and regulatory requirements. This is how we guarantee optimal stability in our business processes and, above all, satisfaction for internal and external clients.

Ensuring accurate, complete data sets for financial instruments, entities, and markets is a key task in data management.

«Inaccurate or missing data sets lead to flawed assessments, incorrect risk estimates, and compromised process steps in downstream systems.»

Dino Werder
Head of Master Data Management & Settlement Services

Since data requirements vary greatly, Vontobel processes financial data from a number of data providers and sources. While this makes it difficult to harmonize, normalize, and standardize the different data formats, provider-specific identifiers, and classifications, it also creates the basis for complex validation and derivation processes. The aim here is to maximize data quality and make downstream processes in the value chain more efficient.

Vontobel continuously monitors around one million financial instruments, together with their associated entities and markets. This is only possible with highly automated business processes, continuous development, stricter validation rules, and constant monitoring of data anomalies using pattern recognition. For example, this enables us to identify financial instruments for which an expected price publication failed to materialize, meaning the valuation of bank and client positions was no longer correct. Pattern recognition can also help, for instance by identifying outliers in historical price data or detecting inconsistencies in the classification of certain instrument groups. It is essential to identify any missing, incorrect, or inconsistent data such as this before it is passed on to downstream systems and leads to disruptions in processes or client complaints. Creating comprehensive validation and derivation rules also enables us to reduce the amount of manual input required and minimize the risk of human error.

The regulators drive the data

The ever-increasing number of rules and regulations from various authorities pose additional challenges when it comes to ensuring robust data management processes, data integrity, traceability, and verifiability. MiFID II, FinMIA, and Basel III all require accurate, timely reporting of financial instrument data to the respective regulators. For example, target market data for all instruments affected by MiFID and cost data for clients must be disclosed to clients. If the issuer or provider fails to disclose this data, we at Vontobel must ensure that we apply estimated value based on statistical evaluations using normal distribution.

Transaction taxes such as financial transaction taxes, withholding taxes, and Section 871(m) issued by the IRS, for instance, pose a further challenge, and entities found to be in violation of their obligations can face heavy fines. Data must be available and verified at the time of settlement to ensure compliance with these tax obligations. Consequently, in addition to hygiene factors and in-house quality requirements, financial risks also come into play in the case of inadequate data management.

ESG data: from 0 to 120

In the area of ESG, Vontobel has implemented more than 120 new data fields and mapped them to financial instruments since 2022, in order to meet growing client demand for information regarding the ESG-compliant investments and to create transparency. Due to the ever-growing number of data points and characteristics and the fact that the pace of business and decision-making processes is increasing exponentially, it is simply no longer possible to efficiently monitor data sets manually. This makes validation processes, automated pattern recognition, analyses, and evaluations indispensable when it comes to massive data shifts. That’s why data management system scaling, control processes, and monitoring by means of dashboards are crucial. Centralized data management is essential.

«Refinement and an extensive control procedure are essential to ensuring high quality in operations.»

Dino Werder
Head of Master Data Management & Settlement Services

Centralized data management also offers a way for us to increase efficiency at Vontobel, by correcting records centrally in a single step and distributing them promptly to all peripheral systems. The level of trust this ensures throughout the organization, and the certainty that the data has already been validated, enriched, and, if necessary, corrected, leads to further improvements in efficiency, as the individual departments no longer have to check that the data is correct. This also facilitates clean data governance and a traceable data lineage, which is needed as a basis for license and contract management.

In many cases, validation processes, rules, evaluations, and pattern recognition methods can only be defined, implemented, and optimized in close collaboration with the individual teams responsible for the specific areas. Although data management may seem quite a dry subject from the outside, it offers us the opportunity to have an impact on various fields of activity and gain a real understanding of downstream processes. After all, you can’t ensure you have the correct controls in place, let alone the right type of data or the required level of quality, until you know how the data is going to be used and how to interpret it.

We can learn a lot from our past

The complexity of financial instrument data and the inherent risks can be traced back to various factors, from different providers and vendors using their own interfaces, formats, identifiers, and classifications through the number of receiving and delivery systems to separate consolidation and mapping approaches. At Vontobel, we employ a number of measures and mechanisms to mitigate and manage this. Vontobel has identified data management as a business-critical task and has invested in the continuous development of validation and pattern recognition processes for several years to ensure data quality. Risks such as breaches of regulatory guidelines, incorrect tax treatment of financial instruments, erroneous portfolio analyses and statements, incorrect risk assessments and the resulting limit overruns, and suboptimal decision-making bases can all be effectively reduced and prevented if the appropriate measures are put in place. In this way, we can significantly increase efficiency for our internal and external clients. The quality of the services we provide to our clients is at the heart of everything we do – because we want to help them make their decisions based on verified data.