The challenges of sourcing, managing and monitoring market data are well rehearsed, but solutions are emerging as financial institutions zero in on their requirements, and data vendors respond. Short term, cost, coverage, accuracy, user rights and compliance are key concerns. Longer term, new approaches to market data such as pay-as-you-go pricing, packaged data and software solutions, data hubs, and data marketplaces could offer benefits for both data vendors and consumers.
A recent webinar sponsored by SIX and hosted by A-Team Group discussed these and other challenges, considered practical solutions, and reviewed market data options going forward. The webinar was moderated by A-Team editor, Sarah Underwood, and joined by expert speakers Martina Satherlund, Global Head of Market Data at Fidelity International; David Bentley, Head of Global Operations UK and Ireland at SIX; and Hugh Davidson, Head of Data Management at Man Group.Market data challenges
Setting the scene for discussion, the webinar opened with an audience poll on the challenges of sourcing, implementing and consuming market data. The results showed multiple sources of market data, and complex and constantly changing implementation as the top challenges, followed by the high cost of market data, and data licences that are often limiting.
The webinar speakers agreed with the results based on regulations requiring multiple sources of market data, commercial agreements that can restrict implementation, the cost of sourcing market data and changing vendors, and storing data. They also cited additional challenges including incomplete data sets, lack of standardisation, complex usage rights, and the frequent need to licence more data than is needed.
The ideal market data scenario
With so many challenges around sourcing and using market data, the discussion turned to the ideal market data scenario with no restraints on budget and resources. The speakers unanimously noted the need for change and discussed the potential of pay-as-you-go pricing, packaged data and software solutions, data hubs, and data marketplaces. Generative AI is also expected to come into the frame.
One speaker commented: “It’s about getting the right data to the right people and not being constrained by cost.” Looking at streamlining processes another said: “I would like to see a scenario where market data users can request data sets and go through a single approval channel to the provider – straight through automated licensing, reporting and billing.”
Investment hot spots
Back to reality and acknowledging that market data is of primary importance to capital markets participants, that good data is vital, and that volumes continue to rise, the speakers noted an increase in emerging use cases requiring investment, such as ESG and sanctions monitoring, as well escalating provision of niche data sets for specific purposes. “These emerging data sets are crucial to what we do, along with more traditional market data sets from large vendors.”
A second audience poll asked where organisations are investing, or planning to invest, in market data. The top answers were improving data quality, accuracy and timeliness, providing new services to customers and growing the business, and gathering market data from new sources. These improvements were acknowledged by the speakers, who also noted the need to improve market data management to avoid increases in cost.
Considering whether now is the right time to invest, the speakers said yes for organisations wanting to grow business as new data sets will be needed, and potentially for those looking to cut costs and achieve operational efficiencies. “Both these aspects are underpinned by accurate data, which trumps everything else,” a speaker noted. In terms of investment: “It has to be now, in truth it was yesterday, but now is the next best option. If you don’t invest now, your business is at risk of not being able to offer services and competitors will come in and deliver them.”
Practical solutions
While investment in market data is ongoing, solutions to its challenges start in assessing use cases and discovering exactly what data is needed and at what volume and speed, as this will be reflected in commercial agreements with market data vendors. Managing costs, not only today, but also looking forward, is also key. “You need to manage and monitor costs, and keep on top of understanding what you’re spending, what is causing that, and what’s driving costs,” said a speaker.
Again, in line with vendor contracts, access rights to market data must be enforced. “If you are bringing data into the building that has restrictions on usage, you must have a means of enforcing that usage.”
With control key to the correct use of market data, partnerships between market data vendors and platform providers that link data and software can provide a one-stop-shop for use cases and their market data.
A final audience poll on market data delivery options showed a trend towards API solutions, which are highly configurable and provide on demand access to data sets. Cloud data services also proved popular, along with real-time streaming. Flat file and email delivery formats were least popular but did garner a few audience votes.
Summing up
Closing the conversation, the speakers offered advice to practitioners working with market data. The consensus was, first and foremost, work out what you need, avoid duplication, find the best provider for the data, and remember that the best is not necessarily the cheapest. Factor in not only the cost of the data, but also monitoring its ongoing use, and make sure you are compliant with vendor agreements, as non-compliance can be a very costly business.
As one speaker concluded: “Develop skills in analysing and understanding the data, support and challenge your users, and research market data products and trends as an obsession.”
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