Exploring coexistence in the securities industry: Why the ISO 20022 central dictionary is the key to interoperability and realising data opportunities

Abstract

This paper looks at how the securities industry can better manage coexistence between different message formats along with realising the many opportunities presented by available data. This is with a view to arriving at greater efficiency, profitability and interoperability within securities and across financial services. It begins with an overview of the quantities and types of data produced by the industry, discussing the costs and risks this poses if it is not sufficiently well managed. It then moves into a discussion of the need for a common language for all parts of financial services, including securities, to agree on in order to communicate more effectively. The paper focuses on using the global ISO 20022 standard for this purpose. It covers the question of migrating to it as a message format, for which there is little appetite within the securities industry in the short to medium term. ISO 20022’s central repository and data dictionary provide a solution, creating the common language that can help to ensure interoperability between entities. It includes discussion of the many benefits of using ISO 20022 in this way, such as reduced costs, risks and timeframes. It highlights how ISO 20022 as a data model can be applied to developing standardised application programming interfaces and building connections with emerging technologies and industries such as distributed ledger technology and crypto assets. The paper also looks at the risks and limitations posed by a prolonged period of coexistence. The use of a common data dictionary can enable firms to interoperate without having to align data exchanges at the syntax level; however, there are still associated costs, risks and inefficiencies. The conclusion is that securities market participants should collaborate to adopt a common data dictionary that can be integrated into their systems, their software and their processes.