Global spending on market data is expected to reach $27 billion in 2016, and it shows no signs of slowing. There are a number of factors driving the investment banking industry’s insatiable demand for data—everything from regulatory pressure and budgetary constraints, to evolving integration requirements and the need to deliver 24/7 global service. At the same time, data suppliers are getting more creative with data contracts and licensing and more rigorous about usage compliance and distribution. Together, these two trends spell trouble for investment banks unless they get smart about market data management.
Thinking about data strategically
We’ve seen investment banks take steps to consolidate data vendors and reduce costs by as much as 20 percent. Some organizations go so far as to rely on a single supplier, leading to reduced bargaining power for the future.
Plus, let’s face it, right sizing contracts and consolidating vendors is really just the tip of the iceberg. Organizations are often dealing not only with a procurement challenge, but also ineffective usage management and in many cases inadequate technology for processing an increasingly large volume of data. What investment banks really need is a comprehensive market data transformation strategy that establishes the structure, proper controls and processes required to continually improve market data administration over time and ensure sustainable cost savings in the long run.
Taking stock of your data
But before you can transform market data management, you have to understand how your organization is using data right now. One question that should be asked is: Is the data fit for the purpose? An internal data audit could give you a better picture of your data needs and market data environment so that you can make better decisions when it comes time to select vendors, negotiate contracts and manage licenses. It’s not a particularly tricky process, but it often requires a bit of legwork and digging.
Chief information officers (CIOs) and chief operating officers (COOs) can begin the process with a few simple questions:
- Vendor landscape: Who are our data vendors? Which ones are critical to the business and do alternatives exist?
- Inefficiencies: Is there overlap or redundancy among data vendors? Are we paying for services that we’re either underutilizing, duplicating or not using at all?
- Contract type: What type of data license model best suits our needs? Is an enterprise-wide contract necessary?
- Contract duration: Is vendor consistency or vendor flexibility more important for our business? Does a multi-year agreement make sense?
Ultimately, good market data management is less about “doing more with less” and more about “being smart about what you have”—so arming yourself with information is a critical first step.