Market data is the foundational information on which front office decision making is based. It drives the core business activities, including pricing securities, making trading decisions, building models, analysing historical trends, calculating P&L, and intraday risk. As well as supporting day-to-day business activity, market data can provide competitive advantage, through better access to data or more innovative applications of the data.
However, providing accurate, timely and complete data can be a significant challenge, both operationally and technologically. There are persistent difficulties at most banks in providing a market data set that is consistent and seamless across all business areas and product functions.
Here are some of the key challenges:
- Siloed internal market data sources: different business areas need access to similar market data but end up sourcing it from different locations. Banks can often pay multiple times for the same data set or duplicate their technology costs when each business unit develops separate supporting infrastructure
- High cost: market data from external providers is expensive. A study from Burton-Taylor estimated that global spend on market data and news was $28 billion in 2017 (1)
- Poor governance: ineffective data management makes it hard to locate the source and owner of market data within a complex organisational structure; handicapping firms from agile changes
- Infrastructure: legacy architecture hampers quick adoption of new innovations and becomes costly to maintain and replace.
In recent years new and innovative approaches have developed to address these operational issues, and provide business and strategic opportunity. These include:
- Cloud hosting: cloud storage options create the opportunity to establish globally standardised, web-assessable market data, without the need for proprietary infrastructure. Bloomberg B-PIPE (the real-time feed equivalent to the Bloomberg Terminal) is now available through the cloud
- Centralised cross-asset market data hubs: banks can choose to consolidate their numerous internal market data stores into a single centralised hub. This provides front office teams with a single global source of cross-asset market data, allows technology to rationalise their market-data infrastructure and provides an improved governance framework
- Utilising FinTech and technology vendors: there are now a number of FinTechs who can help with the challenges of providing market data. These range from managing data lineage (Solidatus), data management and enrichment (Signafire), data consolidation (Xceptor) and cloud solutions (Xignite)
- Make better use of “pay to play” and monetising the data: investment banks produce a lot of proprietary market data, which has value as either sellable data or data that can be exchanged. If banks have better visibility across their entire market data landscape they can create new revenue generating opportunities.
The provision and management of market data still provides a challenge and creating a seamless, reliable and cost effective service is difficult. If banks can look at more innovative and collaborative solutions they may be able to drive greater value out of their market data and create advantage over their peers.