Underlying Causes and Consequences

Market data costs have been under scrutiny for years in the financial services sector. Recent research has found that vendors were “gouging users with aggressive price raises³”,  and despite the known challenges (below), the demand for market data has been almost insatiable over the last 15 years⁴, enabling additional or increased market data fees almost annually.

1. Unclear data vendor rate cards – consumers procure datasets at “massively different price points⁵”.
2. Rising renewal rates – stemming from the above.
3. Complex market data licenses – resulting in a gap between compliant usage and actual usage⁶.

Due to rising trading costs, trading activities are impacted negatively. A recent survey⁷ reportedly found that 33% of participants reduced their presence in some markets or products, with 29% performing fewer trades due to high costs.

Suzanne Lock, Chief Executive Officer at EOSE Data said, "The demand for market data continues to grow and procurement teams are expected to find the best solution for their ever-more complex use cases. The trading venues, brokers and exchanges that EOSE represent are working hard to provide greater transparency and depth of data without putting unnecessary costs onto firms." She added, "The challenge for data producers is to offer flexible licenses which support varying use cases via multiple vendors for different activities while maintaining correct governance and control to ensure fair and reasonable pricing across all firms."

Controlling Market Data Spend

Trial and Tested – Centralisation

Despite various regulatory plans⁸, investigations⁹ and spot-checks¹⁰ to tackle rising wholesale prices (with limited success¹¹), firms are not without options. To rein in escalated market data spending, CJC’s Global Head of Commercial Management, Sara Baker, suggested that firms centralise market data subscriptions as an initial step, “With a detailed and centralised inventory, upcoming contracts can be reviewed, allowing vendor managers to be prepared with plenty of time and information to negotiate with vendors.”

To achieve greater cost efficiency, Sara outlines how her Commercial Management (CM) team approaches data inventory management and centralisation projects:  

Firms then face 2 decisions. Which recommendations (if not all) to implement and whether to leverage Sara’s ‘action-ready’ CM team or establish a new internal function to manage going forward? (More on this later)

Market Data Administration

To achieve a detailed and centralised inventory, Sara emphasized how crucial it was for the client to benefit from an inventory management platform, citing Calero’s MDM¹² and TRG’s Optimize Spend¹³ as leading industry standard solutions. Inventory management is “where everything starts, including the audit” and will be the “golden source for information.” By centralising data subscriptions into the tool, Sara notes that clients potentially gain a consolidated and holistic snapshot of information for billing and potentially renegotiate agreements, for example, negotiating preferential terms to reduce costs if there are additional users or fewer users with fewer requirements.

Precise Efficiency Beyond Administration

While the inventory tool is the administrative vehicle for recording and understanding your information to control costs, the team processes that feed information into that tool are the fuel that sustains it. Centralised ownership must ensure the information is accurate and up to date to avoid duplicated services and potentially relocate unused resources, a potential low-hanging fruit for cost avoidance. A recent project by Sara’s team illustrated this well:

“When you procure a premium vendor terminal, costs can be more than $2,000 per user per month over a 2-year duration. Managing multiple terminals with licenses starting at variable dates, which cannot be cancelled, is a difficult task. Add in users leaving mid-term, a frequent occurrence in large organisations, and you are stuck with an unnecessary monthly spend of $2,000 per terminal. By centralising the administrative process, the market data ‘owner’ has the necessary oversight to relocate unused terminals to a new joiner, another frequent occurrence, without ordering additional terminals.”

Like the humble lightbulb, this may seem insignificant, but the commercial impact in aggregate is massive. In 2 months, a UK-based leading financial company avoided $1.9 million worth of annualised costs through a well-managed process for relocating leaver’s unused licenses and terminals.

Access The Case Study>>

Expediting The Market Data Management Process

Market data-consuming firms need to centralise for market data spending to be controlled. Unfortunately, most financial firms administering market data in-house suffer from multi-team fragmentation and inconsistent data administration. Market data may fit in one of many teams – legal, finance, procurement, administrators, or technology – but ultimately, it is often not a dedicated function and is likely pushed from pillar to post against conflicting priorities.

The faster a centralised market data management function is established and connected to the various teams that feed key information into the inventory tool, the faster tangible cost savings will materialise. Depending on the urgency for results, firms may implement the function internally or outsource (partially or wholly) to an established and experienced team, like  CJC’s Commercial Management Team led by Sara.

Regardless of which option and to side-step the age-old why-managed services¹⁴ debate, the CM team can design and implement a hand-over strategy once any initial work is completed. However, there is a risk of market data estates rapidly spiralling and reverting into a decentralised state, accompanied by loss of market data spend control.

Putting a spotlight on how CM supports clients, Sara replied, “We provide consultancy to centralise a proprietary market data team and design a new market data strategy that increases visibility and control.” Where firms choose to outsource their market data management function as an ongoing service, Sara said, “As a managed service, we provide a 24x7x365 centralised team of specialists and it is our responsibility to cover all sickness holidays as a managed service”, which avoids potential single points of failure and ensures business continuity.  

Sara emphasized that the CM team were “market data management experts, not just inventory experts, and our clients gain access to CJC’s wider team of technical market data experts.” 

Wrapping up the discussion, Sara summarised, “If you have fit-for-purpose market data controls and management in an inventory platform with a centralised administrative team and efficient workflows, then costs should be more effectively managed. Procurement will also be armed with all the usage and business requirement information, enabling negotiations with vendors to stop costs from escalating.”