The process of managing and consuming financial data is constantly evolving. This is not your father’s stuffy market data. Instead, financial technology (Fintech) is a vibrant, changing, growing industry, full of opportunity. It is more critical than ever for financial services professionals to understand the challenges and the opportunities.
Challenges in managing and consuming data abound.
In the financial industry, market data is rich with the information that people require in their quest for alpha. However, there are a myriad of challenges, starting with the sheer proliferation of data over the past several years.
There is more data than ever and it is housed in multiple, sometimes global locations. More sources, more uses, more administration required.
Recently Nasdaq President Adena Friedman categorized three of the top financial data challenges as follows:
- Volume – Companies must find and capture the vast volume of data that is out there but unharnessed.
- Variety – Firms need to make sense of the variety of data once it is captured.
- Velocity – Companies must handle both the ever-changing signals received, as well as the velocity at which they need to draw conclusions from the data.”
From siloed departments to varying technologies used within a single company, users of market data face the challenge of managing that data securely across an entire business.
“Market data is in every aspect of the firm’s work flow, from pre-trade risk to compliance to settlement,” says TerryRoche, Vice President at TabbGroup. “You have to worry about information flow throughout organizations, all of them mission critical, in order to effectively run your business.”
Moreover, some organizations express concern with administrative burdens. Market data managers must understand the complexity of digesting the individual data feed, as well as the nuances of policy and billing procedures related to each product.
The cliché “Do more with less” is particularly apt in this subset of our industry because the market data staff is required to wear so many hats. “A market data manager has to be part lawyer, part trader, part technologist, part risk manager,” observes Roche. “They need to draw on so many different disciplines and better understand what each discipline needs.”
While change has been ever-present throughout the history of market data, more recently the pace of evolution has been feverish. Overcoming the data challenges requires tapping into the most current resources available. Those who don’t keep abreast of data intel and trends via dialogue with their content providers, frequent peer interaction, industry groups, and understanding of policy nuances expose their company to liability risk, or missed opportunities.
Along with challenges, evolving market data also brings opportunities.
So what new opportunities arise as data management and consumption evolves? It’s an extremely complex ecosystem, thus there is opportunity for firms to take on new roles, create new products, or launch new technologies that will help bring value to the data.
As Friedman recently said, “Some market participants will rise to the top in aggregating, processing, and using multi-variate models to draw conclusions from a combination of structured and unstructured data. And some firms are going to be best at using those conclusions to drive investing decisions.”
Most people would not dispute that one of the highest-value opportunity will be new value-added analytics. While we’ve already seen the advent of this market, we’ll likely see more companies emerge that are able to ingest all of the disparate data and draw truly actionable conclusions from it.
Of course, there are many organizations that lack the technological capabilities and/or the human capital to handle such data computation in-house. What will their path be?
Some firms may decide to fully outsource their data management and analytics to tech organizations that focus solely in this space. Others may find a way to keep their data in-house, but leverage other companies’ analytics innovations. Roche predicts that “we will see the democratization of analytics. That is, organization(s) that will open up their computational factory for others’ use.”
Whatever direction ultimately rises to the top in data management and consumption, one thing is certain: market data will continue its rapid evolution with all of the associated challenges, as well as exciting opportunities. And the burgeoning technologies available will allow further advancement in combining data sets, thus providing more paths to alpha.
Jeff Kimsey is Vice President and Global Head of Product Management for Global Information Services at Nasdaq. He is responsible for the ongoing growth and development of data products and services within the Americas.