Most U.S. financial regulators do not use data standards to organize the information they collect from regulated entities. Regulators use inconsistent identifier codes for entities, instruments, and transactions. Too many financial regulatory filings are still collected as documents – paper, Portable Document Format (PDF) files, plain-text HTML – instead of using structured data formats.
This is a problem because when regulators collect and disclose information in, say, the ubiquitous PDF, they create substantially more work for those who want to use it – investors, markets, tech companies, and even the regulators’ own staff.
PDFs are human-friendly, they look the same on your computer screen as they do when they’re printed out. But they lock valuable data away from the user, making large-scale data analysis and parsing nearly impossible. It’s really easy to turn structured data into a PDF, but time intensive to turn a PDF into structured data.
Inconsistent data fields and formats hurt regulated entities, too. If regulators specified predictable data standards, software could help public companies, banks, and financial firms automate their compliance tasks by pulling information automatically from internal systems. Without data standards, automation isn’t possible.
Data standards would make regulatory filings more transparent, useful, and efficient – for everyone who generates, collects, and uses the information they contain.
Regulatory filings should use consistent identifier codes for entities and other concepts, allowing firms to quantify exposure to an entity or product, markets to aggregate all data on a given entity, and regulators to avoid Madoff-style silo failures. Regulatory filings should also use structured data formats so that data flows into databases without manual re-entry. Structured data formats would allow filers to automate disclosure, markets to digest financial information cheaply reducing filers’ costs of capital, and regulators to use analytics to find fraud, risk, and irregularities.
In the same way that the DATA Act of 2014 is transforming government spending, the Financial Transparency Act will transform financial regulatory reporting.
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