By Bob Ward, CEO, QUODD
The term “cord cutter” gained momentum in 2010 as streaming services began to pose a formidable threat to the legacy cable industry. As this trend has manifested over the past decade, it is clear that consumers now have the power to create their ideal mix between traditional and streaming TV options. Similarly, we see a parallel emerging in the consumption of market data across the financial services industry, particularly impacting wealth management, investment advice and their service providers.
While legacy market data providers will always have a place within large enterprises, it is clear that different people within all organizations, especially in the middle and back office, do not always need (or don’t want) the bells and whistles that come with these offers. The data-on-demand trend involves custom delivery models coupled with a user-specific experience that works best with the workflow needs of these workers, who are often remote and need quick access.
As data consumption patterns have changed, market data providers must adapt to stay relevant and focus on modernizing technology platforms and delivery models to meet new expectations. Provided coverage, quality and timeliness levels are commensurate, data solutions integrated into a single digital platform that integrates front, middle and back office workflows into a common experience will be ready. to sit at the same table and potentially leapfrog well-established vendors. .
Why market data matters
Market data has been in the spotlight in recent years, driven by three main factors.
First, there have been residual impacts of the pandemic. Remote work is permanent, which means digital remote access is imperative for operations and back-office employees. For example, demands from specialist groups include an even greater need to access consolidated data from multiple sources. This comes at a time when legacy market data providers are cracking down on usage rights.
Second, companies are looking to squeeze more efficiency out of their back office to combat tight margins. The challenge was particularly difficult for the wealth management service provider.
Additionally, pricing structures for market data content have exploded, and the enabling technology that powers many old-school market data players has not kept pace. This has prevented the institution from leveraging the desired leveraging of a common data platform that can not only connect workflows, but also intersect with functional areas of the institution, such as private wealth, trust, retirement and retail consulting. This makes market data a prime candidate to consider when it comes to streamlining operational systems.
The emerging opportunity to serve the middle and back office
Aside from the macro factors of desired operating model and industry-mandated operating leverage, a one-size-fits-all approach to market data no longer works from a practical (practical?) standpoint. Middle and back office employees are in many cases better served by alternative market data solutions that are more relevant to their specific role and responsibilities.
Existing solutions are too broad and not targeted to workflow needs, and users often pay too much for system functionality and unnecessary information.
New entrants to the market data industry have shown that more agile vendors can rise to the challenge and solve these specific problems. This leads to a much better user experience and continuous improvement in the wider relationship with customers.
This can include anything from automated new customer onboarding, managing price validations, monitoring ongoing price fluctuations, initiating price disputes, and on-demand data mining for workflows such as posting earnings, sourcing cash flow, monitoring corporate actions, and extracting daily accrued liabilities.
The Benefits of Custom Market Data Tools
New billing and pricing models are evolving to align with these consumption patterns. A personalized data delivery model that can better track usage and its impact on P&L is vital. Data quality is the same for a specific point. The benefit is a much more flexible pricing model that is commercially aligned with financial institutions or its service platform.
Another related benefit is that it improves overall governance, which has changed during the pandemic and as more employees work permanently remotely. As the data landscape evolves, institutions and/or their service providers are increasing compliance, corporate governance, and risk management oversight to manage the ever-growing appetite for global investment, new stock exchange regulations, more complex types of security, demands for real-time information, and fiduciary requirements.
Importance of reliable secondary/backup data
With the emergence of new market data challengers, it is important to recognize, just as with the streaming/cable analogy, that these often do not disrupt a primary data relationship, but a complementary one. Indeed, access to reliable secondary and/or backup data is an important part of the overall data consumption strategy.
For example, employees of a wealth management team use secondary and backup data on fixed income securities to gain a transparent overview of market conditions defending the justification of a certain price. This type of transparency data facilitates pre- and post-trade decisions and valuation monitoring. It allows users to better understand the market data inputs that go into creating an assessment.
Caution calls for two sources of market data. Beyond corporate governance and compliance mandates, there are important considerations to take into account. Technology could explode overnight or global markets could experience wild swings, which all wealth management organizations invariably face at times in this ever-changing environment. The engine rooms of the financial services operation need a reliable secondary source that powers market data with the highest degree of quality, reliability, accuracy and timeliness in order to meet the needs of all their stakeholders.
The technological imperative
Future market data leaders will rely on a technology process that easily ingests, normalizes and produces any market data content for consumption. This brings together all the best data content providers in the market through a single customer-centric digital platform and allows operations and customer service functions to be connected with on-demand and personalized access at your fingertips from anywhere.
Ultimately, better and more efficient technology will win out as companies looking to improve operational workflow for their employees and customers as well as streamline their market data spend begin to weigh other options. We are just beginning to explore how this will make the industry more efficient.