About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

Solid Reference Data a Prerequisite For Liquidity Management Success

Subscribe to our newsletter

If you thought the heady world of automated trading, dark pools and liquidity fragmentation under MiFID and RegNMS had little effect on the humble reference data function, then you thought wrong, it seems. A recent research note from analyst Tabb Group identifies a growing need for sell side firms to establish comprehensive liquidity management functions, and warns that not having the requisite integrated, enterprise wide reference data infrastructure in place could represent a real spanner in the works.

According to the paper, Liquidity Management: Pushing Automated Trading Beyond Agency Brokerage, although order management and execution management systems are important components in the electronic trading process, they do not address the way brokers interact with order flow, how sell side traders decide to leverage capital or how firms develop consistent valuation and trading strategies across non-exchange traded products. This creates the need for liquidity management.

“A solid reference data infrastruc-ture is important as a firm begins to centralize its execution model,” the paper continues. “If the firm does not have tight control over its reference data, as it begins to combine order flow from different channels or trade products across asset classes, its ability to link, price and accurately trade these products will be impaired.” For example, it says, when trading the capital structure of a corporation, a firm needs to understand the relation-ship and pricing between equity, equity options, corporate bonds and credit default swaps, so it can properly value and trade these products.
The Tabb research note contends that “while firms traditionally have a good grasp of their market data”, their reference data infrastructure “is a bit more problematic”. “The challenge lies in obtaining the vast selection of reference data for over-the-counter and non-exchange-traded products, as there are few centralized authorities that provide a comprehensive selection of this information.” The challenge is compounded by the fact that as soon as a good centralized reference data source is developed, the investment bank will develop new and more complex products that “were not envisioned when developing the original model”.

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: Strategies, tools and techniques to extract value from unstructured data

Unstructured data is voluminous, unwieldy and difficult to store and manage. For capital markets participants, it is also key to generating business insight, making better-informed decisions and delivering both internal and external value. Solving this dichotomy can be a challenge, but there are solutions designed to help financial institutions digest, manage and make best use...

BLOG

ACA Updates ESG Platform with Greater Private Market Capabilities

Governance, risk and compliance advisory firm ACA Group has updated its ESG data management platform to provide more flexibility to its private investment clients. The New York-based company has retooled the ACA Vantage for ESG platform it launched in 2022 after acquiring ESG data specialist Ethos. The new iteration enables greater configuration of data and...

EVENT

AI in Capital Markets Summit New York

The AI in Capital Markets Summit will explore current and emerging trends in AI, the potential of Generative AI and LLMs and how AI can be applied for efficiencies and business value across a number of use cases, in the front and back office of financial institutions. The agenda will explore the risks and challenges of adopting AI and the foundational technologies and data management capabilities that underpin successful deployment.

GUIDE

Regulatory Data Handbook 2024 – Twelfth Edition

Welcome to the twelfth edition of A-Team Group’s Regulatory Data Handbook, a unique and useful guide to capital markets regulation, regulatory change and the data and data management requirements of compliance. The handbook covers regulation in Europe, the UK, US and Asia-Pacific. This edition of the handbook includes a detailed review of acts, plans and...