市場データは企業にとって強力なパワー: 但し、企業が市場データを最大限に利用できる場合に限る

Firms place a high value on accurate market data to support their business objectives -- from seeking returns for customers to creating personalized financial solutions to ensuring compliance with industry regulations. The successful deployment and management of market data is integral to the implementation of core strategic initiatives. However, over the last several years the cost of market data has risen exponentially. For example, in 2022, TP ICAP reported that financial institutions spent over $35 billion on global reference data annually (up 4.7% from the prior year) making reference data one of the largest expense categories for financial institutions.

Many firms lack the transparency needed to understand data usage across a complicated web of multiple data providers leading to data redundancy, data gaps, and unnecessary costs. In addition, financial institutions continue to face increased pressure to expand their access to market data as competition heats up across the industry. In response, spending is projected to increase at an alarming rate with no relief in sight.

The good news is that there are solutions and actions that financial institutions can take to optimize usage and assert control over their data and by extension their costs. But before we explore a best practice solution, it is important to understand some of the core drivers leading to the expansion of data and corresponding increase in spending.

The Five Key-Defining Wealth Management Trends that Will Drive the Expansion of Market Data

As way of background reference data includes transaction prices, underlying spreads, traded volumes of financial instruments, buyer and seller details, price (real-time and historical) and other data on various investment vehicles across global exchanges and trading venues.

1.Democratization of asset classes. Financial institutions are looking to provide more holistic and personalized solutions for clients across all market segments from mass affluent to high-net-worth individuals. To facilitate this trend, product providers are democratizing access to investment products - such as alternative investments, real estate, fixed income and crypto - that were previously only made available to the Ultra High Net Worth. Wealth managers must, therefore, capture the market data associated with an ever-growing list of investment vehicles to support new downstream customer segments and better service existing ones.

2.The delivery of personalized solutions. In addition to offering a broader set of asset classes and investment products, financial institutions are also delivering more personalized solutions such as ESG and other types of thematic portfolios that are tied to a client’s preferences, values, or even behaviors. These solutions often leverage new sources of market data which adds to financial institution’s market data inventory – more data, more data elements, more data providers and ultimately more complexity and cost.

3.The move toward a hybrid work environment. The pandemic helped to drive increases in market data costs as workers moved out of the office to remote or hybrid working conditions. Mostly gone are the days when an employee could walk to the “shared Bloomberg terminal” that was in the office. The remote workplace put employees in disparate locations which resulted in more users needing access to market data and a greater investment in licenses that are more usable and flexible than traditional workstations.

4.Infrastructure complexity. Wealth management firms often have tech ecosystems which are made up of complex systems with complex data needs. Some of the largest firms may be consuming data from 40 vendors that need to feed into 40 – 50 different systems (including proprietary and third-party) across the front, middle and back office which creates additional complexity when it comes to managing and using market data.

5.Rising costs. The fees for market data have risen by 30-60% in the past two decades, driven by rampant global inflation. This year alone reference data fees have catapulted by 5-10%. Rising costs are pervasive across the globe as inflation continues to plague all types of financial firms. This is clearly a contributing factor to the upward trend in market data spend–putting further pressure on a financial institution’s ROI.

Keeping track of burgeoning data requirements and the ongoing requests for more data feeds becomes a hugely complicated, but extremely important endeavor. In addition to data management, financial institutions must oversee all other moving parts of the business such as subscriptions including types of data, usage, and compliance with existing contracts and licensing terms.

Clearly managing and optimizing market data management continues to be a significant challenge for the industry. Celent believes that the successful deployment and management of market data is integral to the implementation of core strategic initiatives and will ultimately result in a competitive advantage for financial institutions. Our next blog in this series on market data presents solutions that financial institutions can employ to get more from their data while also reducing costs.