KGX is a broker-dealer that was fined by the SEC for regulatory reporting failures and frequent trade errors caused by using multiple inconsistent versions of master data across its systems. To address this, KGX implemented a Master Data Management (MDM) solution to create a single source of security master data. The MDM solution standardized, cleansed, matched and consolidated security data from multiple sources into a consistent version stored in the MDM database. Changes are then synchronized to operational systems in real-time or batch to provide accurate security master data across KGX's systems. Governance policies and processes were also established to manage the quality and usage of security master data going forward.

1. Sherif Rasmy - MDM
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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 Securities
Data VEndor
LTI Securities
Data 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 Office
Secutiy
Risk
Secutiy
Compliance
Secutiy
ETL
ETL
ETL
ETL
ETL
ETL
ETL
Read/Write
Read/Write
ETL
ETL
ETL
ETL
Figure 1 – Current Architecture

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 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: 345900145
UNDR CUSIP: 80004584876
TYPE: OPT
CONVR:
TICKER: IBMOPX
UNDRL TICKER:
TYPE: 12
CONVR: 100
ISIN: 889774584876
CONVR: 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 Securities
Data VEndor
LTI Securities
Data Vendor
UI
UI
Secutiy
Front Office Systems
Back Office Systems
NYSE-NASDAQ
SecuritiesUI
OLTP Back Office DBs
Secutiy
Front Office
Data warehouses
Secutiy
Back Office
Secutiy
Risk
Secutiy
Compliance
Secutiy
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

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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: 7789954326
NAME: IBMOPX 120914 C
CUSIP: 345900145
UNDR: 80004584876
TYPE: OPT
CONVR: 100
SMID: 7789954326
TICKER: IBMOPX
UNDRL TICKER: IBM
TYPE: 12
CONVR: 100
SMID: 7789954326
NAME: IBM OPT 12/09/14
ISIN: 889774584876
CONVR: 100
Security Master
SMID: 7789954326
NAME: IBMOPX 120914 CLS A
CUSIP: 345900145
ISIN: 889774584876
TICKER: IBMOPX
UNDR CUSIP: 80004584876
UNDR ISIN: 443274589823
UNDR TICKER: IBM
TYPE: OPT
CONVR: 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

4. Sherif Rasmy - MDM
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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
develop
outline- 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
SMID
NAME
CUSIP
ISIN
UNDR TICKER
TYPE
CONVR
TICKER
ISIN
TICKER
UNDR CUSIP
UNDR 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

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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.