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August 23, 2017

The Challenges of Managing Market Data

August 23rd, 2017 | By Bernardo Santiago

The market data needs for the financial services industry is at an all-time high. With constant expansion, it’s becoming an increasingly critical component of the business, touching nearly every aspect of it.  At the same time, these same financial institutions are seeking to bring market data costs down.  Along with personnel, real estate and IT, market data spend is among the top expenses for financial services firms. However, many times it’s the least understood and ends up being the expense of which no one wants to take ownership.  For those firms looking to treat market data as a strategic asset, the implementation of a market data management program is key.

Those individuals tasked with providing structure to a market data program face an ever-growing list of challenges.  How many data vendors do we currently use?  With so many data vendors and data sources which ones should we choose?  With so many market data agreements and the constantly changing market data policies, how do we know if we’re properly licensed?  Are we licensed for products that are underutilized or not used at all?  Are the platforms currently in place best suited to meet our current strategy?  How can we optimize our market data consumption across the enterprise to reduce costs?  These are some of the questions that financial institutions are faced with when it comes to market data management.  In order for a market data management program to be successful, it must provide the following services:

Vendor Management:  Be aware of what the data requires, which applications use it, how it’s licensed and what other vendors can provide that same solutions.  If a vendor has no reason to fear the possibility of being displaced, you will have little to no leverage to negotiate on price or usage rights.

Demand Management: All data sources and subscribers must be identified and a cost approval process must be implemented. This will confirm the business has full transparency as it pertains to their market data spend and the impact on their budget when they decide to onboard a new service or renew an existing one.

Contractual Compliance: Find out what audit exposure you have as a firm and remediate any compliance breaches.  Understand how your firm’s contracted capabilities compare with the actual data usage.  Determine the best course of action to minimize future exposure.

Optimization: Review and implement market data industry best practices.  Align the market data strategy with the strategic initiatives of the business and technology teams.

 

About S4 Market Data

S4 Market Data is the leading boutique consulting firm for the Financial Information Services Industry in Miami, with a special focus on market data vendor management.