Sherif Rasmy - MDM

1

Enterprise Application Integration

The Master Data Manager – MDM

Sherif Rasmy - March 13, 2014

Introduction

KGX is a broker-dealer that recently made unpleasant appearances in the Wall Street Journal. It was

fined multiple times by the Security Exchange Commission (SEC) and reported major losses due to

trading errors. The SEC warned KGX of losing its trading license for the following reasons:

Failure to accurately report ownership of public companies (SEC-Schedule-13G) Frequent trade errors and cancellation (Trade Busts).

Failure to capture market manipulative activities (Front Running and Wash)

KGX’s systems use multiple versions of master data. In many cases, these are incomplete, inaccurate

and inconsistent. The bad data quality caused trading errors, failure to fulfill regulatory reporting and

inability to implement effective trade surveillance models.

A Master Data Management solution is required to provide operational systems with high quality

master data. Although master data issues spanned across customer, security and market data;

security data was the most problematic. For example, missing derivative’s conversion rate eliminated

many trades from being reported to the SEC. KGX decided to adopt a Master Data Management

solution to get a single version of the truth for all its master and reference data. KGX decided to start

its MDM experience with building Security Master.

The Problem

KGX is comprised of multiple home grown systems and databases (Figure 1)

There are multiple copies operational security data sourced from multiple security data vendors.

OLTP High Frequency Trading Engine DB

OLTP Retail Brokerage Trading Desk DB

SecutiySEFY SecuritiesData VEndor

LTI SecuritiesData Vendor

UI

UI

Read

Secutiy

Front Office Systems

Back Office Systems

NYSE-NASDAQ Securities

UI

OLTP Back Office DBs

Secutiy

Front Office

Data warehouses

Secutiy

Back OfficeSecutiy

RiskSecutiy

ComplianceSecutiy

ETL

ETL

ETL

ETL

ETL

ETL

ETL

Read/Write

Read/Write

ETL

ETL

ETL

ETL

Figure 1 – Current Architecture

Sherif Rasmy - MDM

2

The data quality of the data warehouses is not much better than that of the operational ones.

dependent on the quality of the sources

Many ETL processes that are owned and maintained by different business and IT units

Security data in many instances is incorrect, incomplete, inconsistent, duplicated and can hardly

be grouped and categorized (Figure 2)

OLTP Retail Brokerage Trading Desk

CUSIP: 345900145UNDR CUSIP: 80004584876 TYPE: OPTCONVR:

TICKER: IBMOPXUNDRL TICKER:TYPE: 12CONVR: 100

ISIN: 889774584876CONVR: 1

OLTP High Frequency Trading Engine OLTP Back Office

Figure 2 – Current Data Characteristics

KGX’s growing number of software components increased operational risk & cost.

The Solution

Architecture Overview

Security Master is a Transactional MDM Hub (Figure 3).

Master security data is stored in the MDM database and operational databases. However, the MDM data base serves as the single source of security data

Security data lifecycle is centrally controlled through MDM services

OLTP High Frequency Trading Engine DB

OLTP Retail Brokerage Trading Desk DB

Secutiy

SEFY SecuritiesData VEndor

LTI SecuritiesData Vendor

UI

UI

Secutiy

Front Office Systems

Back Office Systems

NYSE-NASDAQ SecuritiesUI

OLTP Back Office DBs

Secutiy

Front Office

Data warehouses

Secutiy

Back OfficeSecutiy

RiskSecutiy

ComplianceSecutiy

The Master Data Manager

UI

Read

Read

Read

Extractors

Cleanse Correct Complete Match

Master Database

Security Master

Batch Load

Synchronous Real Time Update

Asynchronous Near Real Time Update

Services Interface

Data Synchronizer

Other Security Data Sources

Life Cycle

Web Services Clients

Read/Write

Figure 3 – Security Master Architecture

Sherif Rasmy - MDM

3

The Master Data Manager

MDM is comprised of three key components:

o Services Interface: A central multiprotocol interface for security data maintenance. Data will be maintained (created/updated/deleted) through: ETL batch processes. Web Services

and User Interfaces.

o Master Database: Stores a single consolidated view of security data

o Data Synchronizer: Responsible for synchronizing master security data with operational security data with any changes. This done either in real-time, near real-time or batch.

IBM and Oracle are the leading providers of MDM solutions. IBM InfoSphere MDM was selected because it will blend with existing IBM InfoSphere solutions KGX uses including: Data Warehouse,

Analytics and Business Intelligence.

Best efforts are made by the MDM engine to create a complete, correct and consistent version of each security (Figure 4). Security master supports all attributes for all operational sources it feeds.

MDM matching algorithms determined that all options are the same. It assigned it an internal id 7789954326 that is imported to all operational sources.

SMID: 7789954326NAME: IBMOPX 120914 CCUSIP: 345900145UNDR: 80004584876 TYPE: OPTCONVR: 100

SMID: 7789954326TICKER: IBMOPXUNDRL TICKER: IBMTYPE: 12CONVR: 100

SMID: 7789954326NAME: IBM OPT 12/09/14ISIN: 889774584876CONVR: 100

Security Master

SMID: 7789954326NAME: IBMOPX 120914 CLS ACUSIP: 345900145ISIN: 889774584876TICKER: IBMOPX

UNDR CUSIP: 80004584876 UNDR ISIN: 443274589823UNDR TICKER: IBMTYPE: OPTCONVR: 100

Figure 4 – Security Master Data Characteristics

All vendor data sources are moved from feeding operational databases feeding MDM.

Although, security master data is stored in standardized canonical structure, the MDM is responsible for transforming the data in the operational format during synchronization.

Return on Investment

Reduced Operational Risk and Cost: Security Master reduced the number of ETL components dramatically. The reduced number of software components reduced the cost associated with maintenance, licensing and support

Increased Agility: New security data sources to improve the data quality can be plugged in one location. We can more rapidly integrate new acquisitions

Sherif Rasmy - MDM

4

Master Data Governance

Master Data Governance is about defining policies to ensure ownership and accountability associated

with master data metadata, life-cycle, quality, security and usage. KGX created a simple governance organization from councils and stewards (Figure 5)

implements

Stewards

Procedures

Policies

establish develop

developoutline- Business representative from Front Office, Back

Office and Information Technology- Establishing the policy and procedures of the organization

- Business representative from Front Office, Back Office and Information Technology- Establishing the policy and procedures of the organization

- Business representative from Front Office, Back Office and Information Technology- Responsible for master data quality and work closely with the corresponding Information Stewards to develop and implement governance procedures in line with expectations set forth under governance policies.

- Business representative from Front Office, Back Office and Information Technology- Responsible for master data quality and work closely with the corresponding Information Stewards to develop and implement governance procedures in line with expectations set forth under governance policies.

Councils

Figure 5 – Security Master Data Governance

Project Planning An MDM project is like any software project and should follow typical SDLC. Security Master went through the following steps (Figure 6).

- SEFY Security Data Vendor- LTI Securities Data Vendor- NYSE-NASDAQ Securities

Identify Sources of Security Data1

Develop Master Security Data Model5

SMIDNAMECUSIPISIN

UNDR TICKERTYPECONVRTICKER

ISINTICKERUNDR CUSIPUNDR ISIN

Choose an MDM Solution Provider6

- Front Office Systems and DB- Back Office Systems and DB- Data warehouses

Modify Producing & Consuming Systems7

- Security Master Services Interfaces- Security Master Data Synchronizer

Implement Maintenance Processes8

- Name councils, stewards and custodian- Establish policies- Develop procedures

Implement a Data Governance Program4

- No Standard Security Identifier- Underlying Securities not Available- Inaccurate Conversion Rate- Inconsistent Reference Data

Analyze Security Data Quality3

- Front Office Systems and DB- Back Office Systems and DB- Data warehouses

Identify Who Uses Security Data2

Figure 6 – Security Master Project Plan

Challenges

- Buy in and Commitment- Data efforts Realignment- Projects Prioritization- Clear Mission Statement- Adequate Training and Support- Strong Leadership

Executive Challenges

- Behavior Change- Adherence to New Policies & Procedures- Implementation of new Procedures- Resourcing- Resistance to Change and Losing Control

Managerial Challenges

- Data Analysis- Resistance to Change and Losing Control- Choosing an MDM vendor- Achieving proper QoS

Technical Challenges

Figure 7 – Security Master Implementation Challenges

Sherif Rasmy - MDM

5

Conclusion

Nowadays, enterprises can’t grow and survive without quick access to correct and complete

information. Data issues not only affect enterprise’s profitability but its existence. This paper covered

the reasons for adopting master data management, the process of developing a solution and several

options for technological implementation of the solution.