Thematix at Semtech 2014

In two weeks (August 18 to 21), we begin our annual migratory journey to the Semantic Technology and Business Conference, this year in San Jose, California, to share our recent experience and to enjoy many meaningful conversations with our fellow semantic technologists   Below are some summaries of our various presentations.  For more detail, please see the conference agenda.  We’d enjoy the opportunity to say hello – so please drop us a line if you’ll be there and would like to hook up.

First up, on Monday the 19th, there’s the perennial favorite, Ontology 101.  This tutorial, featuring Elisa Kendall and Deborah McGuinness, provides an overview of the knowledge representation landscape and attempts to demystify some of the ‘black art’ of ontology development. We will outline basic methodology steps developed over time from a combination of:

• Business requirements analysis derived from best practices in business architecture capability and value stream analysis
• Domain analysis using business requirements adapted from software engineering
• IDEF methods developed for the US Department of Defense
• Best practices from Semantic Web colleagues as well as our own experience in building large, operational systems

Then, we begin on Thursday August 21 with The Semantics of Dates in Financial Contracts, featuring Mark Linehan and Elisa Kendall of Thematix and Mike Bennett of the Enterprise Data Management Council.   This talk addresses dealing with the complexity of payment and other financial schedules by defining an OWL “financial dates” ontology for Financial Industry Business Ontology (FIBO) and for financial applications generally. The talk compares this new ontology to the OMG’s Date-Time Vocabulary standard.

Later on Thursday, there is Semantics in Finance: Addressing the Looming Train Wreck in Risk Management, Regulatory Compliance and Reporting,  a panel discussion that is just too big to fail:

Virtually every bank in the US is scrambling to address compliance issues that Dodd Frank has already raised, and to be poised to deal with those that are coming. According to Sen. Elizabeth Warren, in a speech given on September 12, 2013 on the fifth anniversary of the financial crisis, Congress has a responsibility to eliminate the ability for institutions to become “too big to fail”, and to address those that already are. She stated then that despite the volume of regulations that have already been published, “the

Financial District (Photo credit: dkshots)

agencies have missed more than 60 percent of Dodd-Frank’s rulemaking deadlines.” Spurred on by heavy lobbying from the industry, legislators have been scrambling to take the teeth out of Dodd Frank and to minimize funding for the regulators. On the other hand, there has been bipartisan movement in the Senate to go after issues around risk mitigation, including introduction of a bill last July to revive the Glass-Steagall Act. 

Regardless of the legislative jockeying and tactical to-and-fro, most of the largest banks understand that they not only have inadequate automation in place to address the regulations that have already been imposed, but that even more regulation is inevitable. In a press release the same week in September, JP Morgan Chase announced that they are spending $4B to “boost staff and fix compliance and risk-control problems.” But throwing money and people at the problem alone will not begin to get to the root cause, which requires deep understanding of the business requirements, capabilities, and automation needed to address current, evolving, and exponentially growing compliance data and automation challenges.

Ontologies for

• Legal entities (LEI) and financial contracts (FIBO, from the EDM Council, standardized at the Object Management Group (OMG))
• Financial instrument global identifiers (FIGI, sponsored by Bloomberg, and also standardized at the OMG),
• Financial regulations (FIRO, from the University of Cork)

and for aspects of XBRL are all active efforts to apply semantics to this highly complex and problematic domain. Since FIBO and FIGI specifications were published last year and early this year, a number of large banks and financial services companies have initiated proof of concepts and prototype activities to learn how to leverage the standards. These efforts highlight the power of the technology as well as some of the holes in current methods required to provide much needed solutions.

Finally, we participate in (and host) a panel session, Semantics: the Technical Lens for Financial Transparency and Risk Management. The description in full:

During and as a result of the financial meltdown in 2008, governments and regulators worldwide noted the incredible lack of transparency in many aspects of the financial system. Critical questions were raised about derivatives and over-the-counter instruments generally, the lack of standardized contracts for trade on exchanges, and the inability to identify “who owned what”. There was, in other words, no way to determine the level of exposure a given institution had to the numerous and varied instruments they held, or to other institutions and business entities, among some of the many problems.

A tremendous number of regulations and policies have been established to attempt to curb some of the behaviors that led to the crash. Despite that, the regulators and financial institutions recognize the need for far better visibility, auditable data quality and lineage policies and practices, and risk management. New ways of approaching these problems, capable of integrating vast quantities of information far faster and far more consistently and accurately than has been possible to date, are essential to achieving these goals.

The OMG’s Financial Industry Business Ontology (FIBO) and Financial Instrument Global Identifier (FIGI), and ISO Legal Entity Identifier (LEI) represent key components of any potential solution. They provide globally unique identification of the entities and instruments involved in every trade, with a common basis for understanding those instruments and identifying the complex relationships among their stakeholders. These standards are essential building blocks for institutions and large companies needing to increase transparency, limit risk, and improve compliance. They are already beginning to aid industry firms in providing a cost-effective means for integrating disparate technical systems and message formats, and to facilitate regulatory reporting by providing clear and unambiguous meaning of data from authoritative sources.

In this panel session we will hear from participants involved in developing and implementing the standards as well as from some of their biggest proponents in the finance community.

Unidentified Phoenix palms, Palm Row, San Jose, California (Photo credit: Wikipedia)

We hope you’ll join us there.  If you’re unable to attend, please contact us or the folks at the Semantic Technology conference for copies of the presentations, which we anticipate will be available by September of this year.