By Matt Nurse, Commercial Product Director, Financial Information, SIX
Amid persistent macroeconomic uncertainty and the continued threat of a global recession, it will come as no surprise that accounting departments in practically every business – let alone those operating in the finance sector – will scrutinise company spending as eyes soon turn to business planning for 2024.
If you haven’t noticed an impact yet, you will. For capital markets firms, one of the many challenges faced is the persistence of inefficient processes when it comes to the sourcing, handling, and application of market data. Dealing with the immense volume of data demanded in today’s world is no simple task. Furthermore, data is often disseminated across numerous disconnected systems. However, new research suggests one other element may rank top of the list when it comes to your employer’s data budget – quality. Validated by both buy and sell side, institutions are forgoing cost in order to acquire the highest quality data.
Quality is king
According to our recent research paper with Coalition Greenwich, the global provider of strategic benchmarking and insights to the financial services industry, acquiring high quality market data is now more important to firms than anything else, including cost.
Of the 79 global asset and wealth managers, private banks, and sell-side firms in North America, Europe, Asia and Oceania canvassed in the survey, more than 90% of respondents agreed data accuracy and feed reliability are the most important drivers when choosing market data providers. This trend was most prevalent for buy-side participants, for whom cost falls even further down the list of considerations.
With the cost of market data predicted to rise again meaningfully over the next 12 months, the fact data quality topped the list of concerns for financial market professionals is significant. It seems there are several reasons why data – and more specifically, data quality – has risen to the top of the agenda for firms across the globe. Perhaps most notably, the increasingly complex regulatory requirements firms are facing, placing even more importance on the accuracy of data they acquire. The emergence of new use cases, such as Environmental, Social and Governance (ESG) as an investment vehicle has had tremendous impacts, alongside the need for more traditional market data sets too. For example, as the scope of ESG data coverage broadens, investors look beyond climate and seek to address other environmental issues and social priorities. Tying this all together, we turn again to the impacts of global regulations. As the investment landscape gets more and more complex, businesses run the risk of not being able to offer certain services to clients if they don’t get their data in order.
Historically, firms have focused on the complexities associated with onboarding market data. Now, however, innovation is very clearly driven by industry calls for greater automation and customer demand for comprehensive, real-time access to accurate data on both the buy and sell-side. This trend is particularly relevant in sectors such as banking with client platforms, applications and portals becoming increasingly dynamic, consumable and transactional with real-time data. As a result, data capabilities and platform automation are becoming business critical in terms of satisfying customers and outperforming the competition.
All aboard the cloud
On the intersection of technology and data delivery, it’s clear calls for cloud computing are the most compelling. Although the industry currently stands at a relatively low overall 30% cloud adoption rate, the use of cloud technology and APIs in market data delivery is set to become much more widespread.
In fact, over the next three to five years, more than half (64%) of participants believe the cloud – with its flexible, secure and low-cost characteristics – will emerge as the dominant market data delivery method. In addition, 76% of respondents are demanding access to real-time market data on top of other streaming frequencies – which can be achieved quickly and relatively cost-effectively through the deployment of cloud-based tech. For brokers and investment banks, this figure rises considerably to 94%.
While the macroeconomic outlook looks to remain challenged, a very different type of cloud may soon preside over your institutional life, and it could be key to ensuring your business remains competitive in an ever-evolving market landscape.
Ultimately, as many firms have discovered, poor quality can be costly and difficult to reengineer. The better-quality data you have, the more competitive you are. After all, firms who can adapt more quickly to market changes are going to be best placed to provide greater value-add to their client base, driving forward cost reduction through the application of new technologies.
