The Hub of the Matter: Ken Price Interview

On September 11, 2001, many business leaders put major decisions on hold as they waited to see what impact the terrorist attacks in the US would have on the global economy, government policies and their own industries. On that day, an admittedly shell-shocked Ken Price had arranged to meet a colleague, Steve French, in London to discuss the possibility of starting a new data business. The omens could not have been worse, the situation could not have been more precarious, but the two men kept the appointment and held their nerve, and the resulting company-Avox-has gone on to become one of the leading lights of the reference data industry.

In 2001, Price and French were both working for Algorithmics, an enterprise risk software vendor. The company's derivatives risk management tools were "phenomenal," according to Price, but this didn't always mean they produced perfect results. The two men realized that poor data quality was the weak link in the chain and, over pints in a West End pub, discussed how the problem might be solved.

"The cliché of garbage in, garbage out is absolutely accurate," explains Price. "I remember several times getting raked over the coals by clients at Algorithmics about what they thought was lousy software, but when we dug into it, it would almost always end up being a data node that was wrong-significantly wrong. In one case, somebody transposed the lira/dollar exchange rate, and that makes quite a significant difference to your risk! So that was a key catalyst for starting the company up in 2002."

Turning Points

Identifying an important industry problem is one thing; deciding on the best way to tackle it is another. Price and French soon left Algorithmics to focus their energies on the project. They formed a consultancy, Azimuth Financial, to help firms reconcile reference data internally, but it was not until a meeting with representatives from Barclays Capital (including Julia Sutton, now head of customer reference data services at Deutsche Bank) that they had a ‘eureka moment.'

Barclays Capital had increased its focus on data management since financial crises such as the collapse of Barings Bank. One of the things Barclays had done was set up a shared data services group with responsibility for keeping information up to date. As part of best-practice data management procedures, if a Barclays Capital employee at any of its global locations wanted to change a data field, they would first have to get approval from the central data services group. If the change was approved, the group would update the records that were available to staff globally.

Price says the system was so effective that comparisons between data quality at Barclays Capital and leading data vendors often favoured the bank, because it was harnessing a global network of client and stakeholder contact points to make sure it had the most up-to-date data. He quickly realized there was potential for a wider application of a similar model.

"It was during that lunch with Barclays Capital in late 2002 when the light bulb went on and I said, ‘Wait a minute. Why don't we look at trying to do this on an industry basis? While there are a lot of people at Barlcays Capital, wouldn't it make sense to combine all of the intelligence from other firms?' And you need a third party to do that because obviously firms are not going to share all of their information with each other directly, so they need a third party. We said ‘Let's give it a try.' That was really the birth of what is today the Avox collaborative model."

Price and French established a central hub that validates, corrects and enriches business entity reference data it receives from financial firms before sharing it with other partner organizations. The potential of the model was quickly recognized by other companies, and in 2005, Deutsche Borse acquired a majority stake in the business. Financial backing from the German stock exchange gave clients the confidence to increase their business with Avox and, in the space of six months, the company expanded from a team of six to 60.

The Regulatory Backdrop

While at Algorithmics, Price and French saw the impact regulation was beginning to have on technology. Price recalls that in one year, Algorithmics' revenue quadrupled, largely as a result of Basel II. During the 1990s, the duo watched with interest the emergence of the role of chief risk officer. That led them to expect an increased emphasis on data. Price says it took longer than he expected for the role of chief data officer to be created, but overall his predictions about the rise of regulation were on the money.

Although instinctively resistant to regulation, Price believes financial firms are starting to see the benefits of the changes they have been forced to make. "Firms now understand that by improving data in order to comply with regulations, they are also improving their efficiency," he says. "They see the overlap between all of these different groups, functions and geographies that use the content. Having a central consolidation capability is giving them the opportunity to capitalize on new opportunities in less time."

In 2010, the Depository Trust and Clearing Corporation (DTCC) acquired Avox, with Price remaining in his post as CEO. As a subsidiary of the DTCC, Avox has been contributing to the industry's response to regulators' calls to uniquely identify entities. Its expertise in entity identification is being used in the utility the DTCC established to manage the Commodity Futures Trading Commission's interim legal entity identifier (LEI).

As they hammer out a plan for a global LEI, Price warns regulators should be careful to avoid "scope creep." "It is so easy to say, "If we are going to be centralizing the capture of all this information, why don't we get this extra node? And why don't we look at this additional application of the content and make sure that whatever we build here is future-proofed?" My counsel has always been to focus on the kernel; focus on the very basic data elements. Get that right and then expand," he says.

A New Start

After 10 years at the helm of the company, Price stepped down as CEO of Avox at the end of last year. For a couple of weeks, his LinkedIn profile announced that he was "taking a break." However, after being so closely involved in the data management industry and with valuable experience under his belt, he was never likely to stay away for long. Price has quickly found himself a new job, this time as vice president, sales, at Strevus, a San Francisco-based start-up that is providing its own collaborative data platform.

Price is excited about the new project, which he says will introduce some "Silicon Valley innovation" into the reference data space. He explains that Strevus is harnessing many capabilities that have been developed in the consumer space, including social networking, big data, trust networks and intelligent entitlements. The company has ambitions to provide a multi-industry solution, but will initially focus on the financial industry, where it believes it can help to keep risk and compliance costs down.

Time will tell if Price has picked another winner.