In 2020 the need to do more with less will continue to rise for those managing market data for their companies. Many financial institutions are looking for opportunities to introduce automation and integration to cut costs, while maintaining their service during transition.
At the same time, providers of market data are working to defend their usage policies. Many consumers of market data find ways to redistribute that data widely among their clients. In many cases this distribution may violate the terms and conditions they’ve agreed to in acquiring the data. This leaves them exposed to significant fines and interruptions of service.
Exacerbating the problem, many of the people leaving these large institutions are forming their own small consultancies in an effort to provide outsourcing of the services they formerly provided as employees. They’ve observed in many cases that though their companies had diminishing budgets for headcount, budget for contracted services from outside vendors was still very high. This may be a short-term development, however, as there may ultimately not be enough outsourcing work available to satisfy all of them and being small shops, they may lack the resources necessary to get the job done properly.
The departure of so many administrative resources has required remaining analysts to step up to fulfill these administrative tasks, making it impossible for them to continue to be analysts. This is a default condition, not a solution.
Introducing Automation and Integration
The need to do more with less is encouraging many companies to find ways to improve efficiencies by removing and replacing processes such as manual data entry or uploading of the same data to multiple systems. Integration of like-minded systems is key to breaking this revolving cycle where analysts don’t have the time to be analysts. Introducing automation to everyday tasks is a powerful key to freeing up more capacity and availability.
Market data consumers have many options available when seeking to reduce their overall spend, and many of these will be exploited in the coming year.
First, these companies will be looking carefully at all their existing market data subscriptions and services to determine which are in use by what individuals and departments. They stand to find many that are no longer in use by anyone and this will enable the first round of reductions. One challenge they may face is their own hesitance to invest in tools and services to manage the required inventory of services in use. The decision needs to be based on an educated estimation of the savings to be realized over the long-term as compared to the short-term expense.
Those tempted to perform this self-certification process themselves without tools or assistance may find themselves ill prepared to do so and may find it costs them more.
More aggregators are entering the market creatively offering alternative data products. In a market where major providers are regularly accused of being rigid in policy and high in price, these aggregators access the major data sources, often in significant volume, change it, manipulate it, and then re-package it differently so they can price it differently with more flexible options to better serve their clients. They also often provide additional trend and analytical information along with it.
While these offerings may seem niche and exciting, some larger consumer organizations are often hesitant to explore these new alternative products. This may prove to be another trade-off between risk and reward for choosing something cheaper that many others are not choosing to consume.
When repackaging, consumers and aggregators must both exercise care in assuring they remain in compliance with both government regulations and market data provider rules. Violating either can result in high and enforceable fines. Many vendors and distributors seek to benefit from the fact that their contracts are long and complex so nobody’s reading them and nobody really understands what’s in them. This encourages them to take risks which is fine until one of the financial institutions involved undertakes an audit.
While it may be preferable for all vendors, distributors, and exchanges to keep their contracts open and transparent, accompanying ambiguous contract documents with machine-readable digital rights management data, how long will it be before the industry moves to this new method of storing and interpreting contract dos and don’ts?
Meanwhile, a few of the large organizations are realizing that the road to better compliance begins with starting to collect and document some of the major dos and don’ts of contract terms and conditions.
An Industry-Wide Challenge Requires a Concerted Response
With vendors, distributors, and exchanges enjoying inflated fees thanks to their ambiguous and confusing contracts, clients and market data consumers must challenge them, consolidating their efforts to work together on an agreed-upon set of standards for contract construction. Rule-based or trend-based questioning of exactly what data entities they’re seeking will make them easier to contract and hard for providers to obscure.
Today’s demand management begins to move the industry closer to this paradigm. Many are moving rapidly to employ more and better automation to enable fewer personnel to manage more of the rudimentary and repetitive tasks so people can focus more strategically. Artificial Intelligence (AI) and Machine Learning (ML) technologies are facilitating better decision-making and efficiencies in contracting appropriate data.
The ultimate goal of all this activity is to make market data providers far easier to do business with, making it more streamlined and quicker for clients to get what they need, the way they need it, for a far lower costs. This requires making the product offerings themselves easier to understand, easier to select, easier to invoice, and easier to access in more flexible ways.
This is an environment in which the client consumers are very large and accustomed to paying large sums to acquire the data that enables them. As they exert leverage, data providers must demonstrate significant improvements in customer service, ease of ordering, ease of paying invoices, and reduced instance of support requirements.
Bottom-line the entire procurement-to-payment cycle must stop being the nightmare it has been for many years and become far easier to use. Market Data Management must mature in 2020.
At Calero, our goal is to fulfill the areas in which our clients lack resources. We have the knowledge and understanding to provide the information they need to make the best decisions and take the most effective action possible to make market data more accessible more flexibly to more people with far less exposure to risk than ever before. Contact us today to learn more.