Data management executives handle one of the most critical aspects of the financial services industry – the information used to trade and process millions, if not billions, of securities transactions each year.
They are responsible for ensuring that the market, reference and corporate actions data used to describe securities, counterparties and clients as well as value portfolios is accurate.
But just how qualified are they? “Nobody really goes to college to become a data management specialist,” says one data management director at a New York bank. The executive just happened to stumble into his job after spending several years in back office operations. Yet another executive at a rival bank said that he did so after spending several years in the IT department and another executive at a brokerage firm was a finance major who couldn’t find another job.
Now, a new certification program created by the Financial Information Services Division (FISD) of the Software & Information Industry Association (SIIA) in Washington D.C. could ensure a minimum level of competence. The certification for financial information associates, which started last week is designed for lower to midlevel executives. But those with the one to three years of work experience are most often the ones doing most of the grunt work.
The test which lasts about two and a half hours consists of about 150 multiple choice questions and is now available for about $125 for the first 200 executives who sign up in what FISD is calling the early adopters program. After that time the pricetag goes up to $450. That doesn’t include the cost of taking a class to study for the exam.
While the certification program is a far cry from a mandatory licensing program now being contemplated by the Financial Industry Regulatory Authority for operations executives, the goal is the same: to ensure that professionals have a minimum level of competence.
Like most operations executives, data management executives are often trained on the job – and informally. That means they learned as they went along And while that is often the case with many jobs on Wall Street – that is those unrelated to advanced risk and quant analysis – mistakes in data can be just as costly. They can add up to thousands if not millions of dollars each year in clean up costs. That means the cost of making the investor or counterparty whole.
The most common based on interviews with the three data management executives interviewed by Securities Industry News last week: the wrong valuations on portfolios, pricing errors in nonstandardized financial instruments – that means everything not traded on an exchange; monies wired to the wrong counterparty; delays in settlement of a trade; errors in margin calls and of course errors in measuring market, counterparty and credit risk .Yet another mistake: not understanding the terms of a contract with a data vendor and redistributing data without consent. That can lead to a fine by the vendor and cancellation of a contract.
Few of those mistakes ever make headlines but they can add up to thousands if not millions of dollars in cleanup costs, not to mention financial writedowns, penalties and reputational risk.
While the FISD isn’t requiring that professionals actually work between one to three years it’s unlikely that those without any experience will be able to pass the test even if they read the syllabus the FISD is presenting on, says Tom Davin, managing director of the FISD.
Among those designing the test were a cross-section of buy and sell side firms as well as data vendors. They included representatives from JP Morgan; Citi; UBS; Alliance Bernstein; Fidelity; Morgan Stanley; the Federal Reserve Bank of New York; Interactive Data and Thomson Reuters.
So far about 20 data executives have taken the test but they won’t know whether or not they passed until the remaining 180 take the test. The first twenty executives were testing the content, scheduling and onsite test taking procedures. It has yet to be determined just what the passing grade will be or how many questions the test will entail.
“We are likely to eliminate a few of the questions on the exam on the basis that many of the twenty executives who are seasoned professionals got the answers wrong,” says Davin. He admits that even he got one of the answers wrong and he is a seasoned professional- having spent over twenty years in the market data industry. Prior to joining FISD he headed up the market data department for about ten years
So what should you know The FISD has come out with a suggested syllabus – a version of Cliff notes – which could provide executives with some guidance.The four parts are “The Markets; The Data; The Technology and Issues and Trends.
Here is a description of some of the four sections:
The markets: understanding the role of exchanges, government and regulatory agencies and market data as well as the trade lifecycle; different departments within a bank or brokerage firm; and major classes of assets.
The data: understanding the types of data exchanges generate; data found on the Internet; the differences between market; historical and time series data; reference data; the types of data and their contracts; and inventory management for data.
The technology: understanding hardware, operating systems, applications, programming languages, computing technology, datafeeds and related terminologies such as throttling; push/pull technologies; protocols; data distribution systems and software; workstations; instant messaging; algorithmic trading; and programming languages.
Industry issues and trends: understanding the role of electronic communication networks and alternative trading systems; dark pools; best execution; the European Union and markets in financial instruments directive; the concept of a consolidated tape as well as the overall financial crisis
The benefits of certification: for one, says Davin, a firm can verify whether or not its data management expert understands the basics. For employees, it can also spell a potential pay raise. Or it could mean the difference between keeping or losing their jobs. Some firms may opt to require their executives to get certified.
This article can also be found at SecuritiesIndusty.com.
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