Chapter 4: The golden record dilemma
Everyone wants it, but no one wants the liability
Everyone agrees that the market needs a golden record, a single, immutable source of truth for every corporate event, but opinions vary on ownership and liability.
The risk of publishing incorrect data is not new; a properly implemented golden operational record does not create additional liability. In fact, industry-wide adoption of standards, such as ISO 20022, can reduce risk and deliver greater straight-through processing. A true golden record removes the need for data interpretation, manual input, and multiple reconciliations, and eliminates incomplete or truncated information, data scrubbing, and other causes of operational error.
Realising these benefits depends on full trust in the source data, from the issuer and issuer agents, and clear accountability for its governance. Until ownership, accountability, and oversight are firmly established, the golden record will remain technologically achievable but commercially uncertain.
Are CSDs the ideal solution?
For an optimal industry-wide operating model, the majority of survey respondents (36%) point to CSDs as the natural owners of the golden record. This has some merit. They are the first recipients of the issuer’s data, and are therefore well positioned to create, maintain and ensure its integrity. And 52% of CSDs agree with this position.
36% of firms believe CSDs should be responsible for golden copy event data – and CSDs agree
Alternatives exist. Issuers (16%) and transfer agents / sponsors (15%) are cited as ideal sources - which is entirely logical. However, whilst they are ideally placed to create automated, standardised announcement data, many lack the incentive and urgency to act.
Interestingly, 10% of respondents look to global custodians to be the responsible party, though their dependency on accurate upstream data makes this impractical. Even so, 43% of respondents view global custodians as critical enablers capable of proliferating accurate data throughout global custody networks, and beyond.
Beyond market infrastructures, technology companies are emerging as critical enablers, recognised by 57% of respondents. To play this role, there will need to be robust governance and controls in place to ensure a single, consistent version of the truth across all platforms and providers.
Regulators, too, have a coordinating role to play. 27% of survey respondents consider them to be ‘eco-system coordinators’ with 29% classifying them as critical enablers. Europe provides a useful precedent: ESMA already maintains numerous central reference databases such as FIRDS (an instrument reference database). A similar model for golden-source asset servicing data may offer a practical path forward.
Who should drive change? CSDs and regulators – with tech firms as enablers
But where should the liability lie?
Conversations with our industry experts and other infrastructure providers reveal a single major concern: liability.
If a CSD publishes a golden record using data sourced from an issuer or agent containing an error (e.g. a wrong ex-date or a missing tax field), that error cascades throughout the post-trade value chain, impacting custodians, brokers and investors. If that error causes millions of dollars in losses, who is accountable? And who pays?
Collaborative utilities backed by transparent governance could offer an alternative way forward. This is a model which could distribute both data and responsibility - an area where established technology infrastructures have proven viability.
However, ultimately, until the industry (or its regulators) establishes a clear legal and commercial framework for liability, the golden record will remain a technological possibility but a commercial impossibility.
