Rebuilding Financial Industry Infrastructure

Journal of Risk Managment in Financial Institutions Volume 11 / Number 1 /Winter 2018

12 Pages Posted: 10 Jan 2018

See all articles by Allan D. Grody

Allan D. Grody

Financial InterGroup; New York University (NYU) - Leonard N. Stern School of Business

Date Written: November 5, 2017

Abstract

Setting proprietary standards for elemental data components of financial transactions, once the province of market participants and intermediaries, their sovereign regulators, and software and data vendors, have evolved into a global open source standards requirement. Global data standards initiatives are now addressing the elimination of infrastructure costs and risk prone interoperability and data mapping processes fostered by using proprietary data standards. Data standards have taken on new meaning and urgency as it has also become a prerequisite to securing financial networks from cyberattacks and enabling the new technologies of the digital age.

A new generation of innovation led by distributed ledger technology (DLT), a supportive data base technology of the Blockchain, is being actively pursued by financial institutions and their financial market utilities. It is also of interest to many financial market regulators who are requesting access to more granular standardized transactional data. It has tremendous promise to eliminate reconciliation processes at financial institutions and refocus many of the hundreds of data intermediaries and financial market utilities that play a significant role in reconciling risk prone and costly non-standard data. This paper argues that the components parts for a sustainable financial industry infrastructure rebuild is coming into existence but uncoordinated efforts across the globe will stifle its effectiveness. These initiatives need global coordination. This paper proposes a new industry/government partnership to facilitate implementation of data identification standards, accelerate data harmonization initiatives and sponsor a secure financial-sector DLT protocol standard.

Keywords: Standards, Distributed Ledger, Data Management, Risk Management, Financial Crisis, FSB, OFR, GLEIF

JEL Classification: G1, G2, F6

Suggested Citation

Grody, Allan D., Rebuilding Financial Industry Infrastructure (November 5, 2017). Journal of Risk Managment in Financial Institutions Volume 11 / Number 1 /Winter 2018, Available at SSRN: https://ssrn.com/abstract=3096721

Allan D. Grody (Contact Author)

Financial InterGroup ( email )

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New York University (NYU) - Leonard N. Stern School of Business ( email )

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