A consolidated data layer is a requirement in a modern investment management process. All data in the investment and research process needs to be available to the back, middle and front office. Implicit in this statement is the requirement that the underlying symbology has been created and is being maintained. But what does this actually mean? And more importantly, what does it entail?
I have written an article about our simple yet powerful data model, where I refer to symbology, specifically emphasising how our data model caters towards this important requirement. But what is symbology?
In short, symbology is a catalogue identifying (in a systematic order and hierarchy) all the entities to associate data with. It is the door that everyone in asset management needs to walk through before they can navigate and explore the data in the organisation. The 3 facets to symbology include:
The first aspect is a well known problem. The problem arises due to the fact that multiple vendors and exchanges provide differing codes or identifiers for the same entities trading on an exchange. For example, one could use the Reuter’s Instrument Code or Bloomberg Ticker Code for the same instrument. The challenge arises when multiple vendors are supplying data and using their own proprietary code standards. In these cases, data must be associated with the correct entity.
For example, one needs to map
to the same entity.
The second aspect involves the corporate structure of the company under consideration. This involves building and maintaining the corporate tree structure. This in effect details where every instrument, issuer and company fits into the tree.
There are differing opinions on the number of levels in the hierarchy tree. At Quintessence, we have identified 6 levels in this structure.
A partial instance of the Corporate Hierarchy Tree for SIEMENS is shown below.
The third aspect involves corporate actions. Simple corporate actions such as share splits and consolidations can be managed easily enough using an adjustment factor timeseries on the entity. This timeseries is used to enable comparison between past and present prices and financial line item estimates. But when a corporate action involves a merger or unbundling, managers need to track what happened to the issuer and how the fundamental and estimate data is retrospectively assigned. In the most generic sense, corporate actions can be seen as events that change the corporate hierarchy tree structure over time.
And that in a large nutshell is SYMBOLOGY. Without it, it is very difficult to consolidate all your data. It is also an essential feature of any risk process. Quintessence and our awesome consultants can help you meet this challenge head-on.