Although structured products have enjoyed a buoyant first half of the year, there are still some operational challenges. The most pressing of which involves the onward distribution of financial products’ reference data by issuers to market participants (e.g. exchanges, data vendors, CSDs, trading platforms, banks, clients, etc.), an activity which continues to be highly manual and heavily intermediated. In many markets, issuers continue to disseminate reference data by e-mail using non-standard formats such as PDF and Word, which in turn are manually entered into different systems by the final data recipients.
This archaic method of information sharing can create all sorts of operational risks. For instance, data receivers could make a typographical error when computing the information leading to misinterpretations of the data itself. Moreover, financial institutions often have to perform data reconciliation checks to ensure the material they receive is accurate, which is a costly and time-consuming process. The speed of data processing can also be a critical factor. It is not uncommon for issuers to create the official term sheets or distribute data days after a trade has occurred, meaning investors often rely on incomplete information for their own portfolio analytics and risk calculations. This time-lag is also a regular occurrence when issuers communicate the details of product events, which can create added costs for the investors or lead to key events being missed.