FMSB publishes Spotlight Review on Algorithmic Trading and Machine Learning

FMSB publishes Spotlight Review on data management in the financial system

The FICC Markets Standards Board (FMSB) has today published its second Spotlight Review examining the crucial role of data management in the stability and resilience of wholesale FICC markets and financial systems.

The Spotlight Review considers:

  • seven sources of critical data risk covering business continuity, data confidentiality, trading, aggregate exposure, regulatory enforcement, ownership rights and security risks relating to misconduct;
  • regulatory authorities’ work in this field and the benefits of increased standardisation across different international jurisdictions; and
  • eight key components to promote effective data governance covering the data lifecycle, data policies, data taxonomy, mapping data sources, data movement and lineage, data classification, data leakage detection and data quality.

It establishes the foundational need for robust data governance and management strategies, both within firms and between different markets participants who are active in rapidly changing wholesale FICC markets. The paper highlights the significant benefits to market participants from moving to a more centralised data strategy, recognising the magnitude of centralisation will vary from firm to firm depending on size, complexity and business models.

Martin Pluves, CEO of FMSB, said: I am delighted that FMSB is publishing this thoughtful paper on data management. Data drives today’s FICC markets. Ensuring confidence in data is vital to stability and resilience of the financial system. With exponential growth in the volume and sophistication of data, there are opportunities for increased transparency and improved overall efficiency of FICC markets. There are also great challenges and significant risks, explored in this paper. Given the growing importance of data there is an increasing interest in developing standards in this area and on strengthening data governance, areas FMSB and its diverse members are well placed to address.”

Gareth Ramsay, Executive Director of Data at the Bank of England, said: “The rapid pace of systems development and the increasing dependence of the financial system on data is a key strategic focus for the Bank. Therefore, the FMSB’s Spotlight Review is a welcome exploration of the critical role of data management for the financial industry. The key themes in the review, particularly the importance of data governance and standardisation, complement the Bank’s ongoing data collection review, which aims to make data collection more efficient for the Bank and for firms, and to improve our ability to use that data effectively.”

This Spotlight Review is the second in a series that is collectively looking at issues of FICC market structure and the impact of regulatory and technological change on the fairness and effectiveness of wholesale markets.

The Spotlight Review is available for download here: fmsb.com

Media contacts

Maitland/AMO

Andy Donald or Sam Turvey

+44 207 379 5151

adonald@maitland.co.uk

sturvey@maitland.co.uk

Notes to Editors

1) The Fixed Income, Currencies and Commodities Markets Standards Board (‘FMSB’) is practitioner led, funded by members and operated by the major participants in wholesale markets to improve standards of conduct in wholesale fixed income, currencies and commodities (FICC) markets. It aims to bring transparency to grey areas in the wholesale FICC markets by identifying emerging vulnerabilities, clarifying and documenting practice and agreeing standards to improve conduct and market behaviour. Ensuring that wholesale FICC markets are transparent, fair and effective for all participants is at the heart of FMSB’s mission.

FMSB Standards set out Core Principles and accompanying guidance on the most important aspects of practice where ambiguity risks undermining the transparency, fairness and effectiveness of markets.

FMSB Statements of Good Practice set out clear expectations and guidance on good practice in relation to broader areas of uncertainty in wholesale FICC markets.

FMSB Spotlight Reviews encompass a broad range of publications used by FMSB to illuminate important emerging issues in FICC markets. Drawing on the insight of members and industry experts, they provide a way for FMSB to surface nascent challenges market participants face and may inform topics for future work. Spotlight Reviews will often include references to existing law, regulation and business practices. However, they do not set or define any new precedents or standards of business practice applicable to market participants.

All FMSB publications are available on the FMSB website at fmsb.com/our-publications/.

2) Setting up the FMSB was one of the main recommendations from the Fair and Effective Markets Review (FEMR), which was conducted by HM Treasury, the Bank of England, and the Financial Conduct Authority.

FEMR set FMSB four strategic goals:

  1. Identifying global market vulnerabilities through scanning the horizon for emerging business practice risks.
    1. Developing best market practice through the production of standards and other materials that create a common understanding.
    1. Driving global adherence through ensuring standards are comprehensible and practical.
    1. Developing consistent approaches to market practices through identifying gaps and inconsistencies in existing regulatory standards and working with other standards setting bodies.

3) FMSB has a Standards Board drawn from senior executives from across wholesale markets, from corporate clients, asset managers, sell-side participants and intermediaries and infrastructure providers such as exchanges and custodians. In specialist, focused committees, sub-committees and working groups, industry experts debate issues and develop FMSB Standards and Statements of Good Practice, and undertake Spotlight Reviews that are made available to the global community of FICC market participants and regulatory authorities.

4) FMSB members bring together sell-side investment banks, buy-side asset managers, market infrastructure providers and exchanges, custodians and users of the market such as corporates. This constitution is unique.

The member firms are listed and available on the FMSB website at fmsb.com/who-we-are/.

AstraZeneca

Australia and New Zealand Banking Group

BAE Systems

Bank of America Merrill Lynch

Bank of New York Mellon

Barclays

BHP

BlackRock

Bloomberg

BNP Paribas

BP

Citadel Securities

Citigroup Global Markets Limited

Crédit Agricole CIB

Credit Suisse

Deutsche Bank

Euronext FX Inc.

Goldman Sachs

HSBC

Invesco

JP Morgan

Legal & General Investment Management

Linklaters (Legal Advisor)

Lloyds Banking Group

London Stock Exchange Group

M&G Investment Management Limited

MarketAxess

Morgan Stanley & Co. International plc

National Australia Bank

Nomura

RBS

Refinitiv

Rio Tinto

Royal Bank of Canada

Royal Dutch Shell

Royal Mail Group

Société Générale

Standard Chartered

Standard Life Aberdeen

TP ICAP

Tradeweb

Tradition

UBS

Vodafone

XTX Markets

Last updated 26 May 2020