A vision of a model master KAG
Our vision of a model-master KAG is the totality of all possible demands on today’s master KAGs. All requirements will certainly never be met, however, it can be used as kind of a benchmark. In any case, it could help to realise deficits in some areas while assuring progress in the development of other areas.
Adviser and master KAG - ways to communicate
Ideally the external adviser can connect his own portfolio-management tool to the production database of the master KAG. Due to a lack of standards this way of ex-changing data is currently not possible. It will take some more years to establish some kind of standard that will be supported by software companies as well as financial institutions. Until then the advisers will and mostly have to rely on their own data keeping, nevertheless it has to be matched with the master KAG data. Thus, a basic competence of a master KAG is the provision of up-to-date information in a processible format, preferably downloadable from a password protected website. The supposedly best way that the master KAG provides a portfolio management tool is not feasible because advisors may have to deal with too many different tools.
Another distinguishing feature of the model-master KAG is that the adviser has the choice of numerous ways to transmit his order. Fax and phone can be used as well as email, although, the latter often has inherent security problems. As it is in every KAG’s interest to enlarge the share of electronic communication to close the gaps in the STP and minimise manual work this is also the direction most advisers want to and have to go.
Currently the most feasible solution would be a secure internet connection to upload the investment recommendation or to directly enter it into a screen form. From there the data is easily processed by the KAG. More secure and efficient to exchange data is SWIFT which is already in widespread use when it comes to backoffice and settlement operations. The model-master KAG automatically imports orders sent by SWIFT into its system and automatically sends out an appropriate message to the adviser after compliance is checked. We consider SWIFT as indispensable for a complete STP.
Modular structure for order and data management
The order and data management of the model-master KAG is characterised by modularity. Only this structure allows for a high flexibility when it comes to improving or extending single functions versus the relative rigidity of partially or fully integrated systems.
The front-to-office system has to be most flexible. Although there is no current need the advisers should have the option to use the system of the master KAG. This would be the easiest way to give information on the current cash position or pending orders. Ideally, files or SWIFT-messages are automatically imported into the front-to-office system. Via electronic interface the compliance system carries out the pre-trade check. Finally, the system generates a message for the adviser and transmits the order to the middle office or trading desk. The front-to-office system should also allow for the flexible and structured display of portfolio data.
Another integral part of the model-master KAG is a well-organised and comprehensive data warehouse where all data are centralised as well as a reporting tool that draws on this data. The data warehouse contains data on funds as well as indices or ratings and is continually fed, for example, the information about the execution or booking of an order gets immediately into the database and not until the next day or so. Then the adviser could get prompt information about his fund via the reporting tool. The biggest advantage of centralised data versus several smaller data pools is its flexibility. All relevant data can be generated out of one source by online analytical processing (OLAP).
The reporting tool has to fulfil high demands, too. Information and analyses are supplied in individual ways to clients, advisers,
and consultants. The information can be composed individually
and access has to be restricted appropriately.