Financial service industry regulators are focused on observing systemic risk across enormously complex interconnected global financial institutions. While these systemically important financial institutions continue to improve their enterprise risk management systems, regulators are now intent on imposing further regulations to analyze the risk exposures that arise across these firms.

It has been accepted by regulators that the very first pillar of global financial reform is a standard for identifying the same financial market participant to each regulator in the same way. Getting agreement on a globally unique and standardized Legal Entity Identifier (the LEI) is the first step. The G20’s Financial Stability Board has empowered sovereign regulators to develop a global identification system for this purpose.

Our research has focused on the past and current efforts by industry members and sovereign regulators to develop reference data management standards for financial services. We have reviewed the origins of systemic risk data aggregation issues and how standard identification of financial market participants and the products they trade connects to regulators’ and financial institutions’ ability to analyze systemic risk.

Our proposed global identification system and its associated reference data utility — the Central Counterparty for Data Management — addresses all known elements of regulators’ requirements for globally unique identification and their associated reference data. It also lays the foundation for further rule making on operational efficiencies and straight-through processing, contract and instrument identification, corporate event identification, and financial data aggregation of valued positions and cash flows for systemic risk analysis.