Market Data Estates Are Potentially Over Resourced By Financial Firms
The cost of Market Data is notoriously one of the largest operational expenditures facing financial firms. However, firms do not usually fully understand why and how they can mitigate and manage the costs. This article provides an insight into five common types of client-facing challenges, the associated risks, the recommended approach, and how CJC's award-winning consultants can help.
Market Data is one of the largest operating expenditures of financial firms and is primarily associated with the cost of accessing market data feeds. A report in 2020 found that market data costs the sell-side approximately $140 million a year and roughly $46 million from the buy-side - that is an alarming total of $186 million a year on average.
The financial burden of market data is a well-explored issue, but understanding why and how to mitigate and manage the costs is usually overlooked by industry participants. This article aims to provide an insight into how firms can manage or mitigate costs internally.
Managing & mitigating market data spend
Faced with rising market data costs, financial firms often struggle with the commercial management of their market data due to the increasing complexities of sourcing, licensing and reporting requirements. Based on market research undertaken by CJC, challenges faced by market data consumers usually fall into five categories:
Cost Management and Transparency;
Vendor and Exchange Contractual Compliance;
Governance on Controlling Spend;
Operational Efficiency and Resource Scalability;
Knowledge and Expertise in a Complex Industry and Environment;
Despite identifying these key challenges, many firms wrongly presume they have arisen simply due to a lack of dedicated capacity to address the issue. However, the research revealed that almost all research participants had dedicated personnel, functions, tools, workflows and processes to administer their market data estate, yet the challenges remain.
RISKS OF IGNORING THE MARKET DATA CHALLENGES
Left alone, the risk of a sub-optimal market data environment can have legal, monetary and reputational consequences. The legal dispute between UBS and Bloomberg, settled under undisclosed terms, is a recent example that demonstrates this. Other consequences of sub-optimal market data environments can include:
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Addressing market data challenges
The research highlighted that simply having a dedicated internal capacity may not address the challenges facing market data-consuming financial firms, which indicates potential outsourcing to credible consultants with a demonstrated wealth of experience. An indication that aligns with recommendations from Forbes, which suggested working with someone that possessed “the experience to help you navigate any uncertainty you might face” and reasons included:
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Bringing transparency to complexity
CJC’s award-winning commercial management team offers a wealth of expertise and more than 20 years of industry experience, delivered by various professional services and consultancy offerings focused on the market data commercial management space. The commercial management service targets both immediate challenges and long-term cost control and risk mitigation, by establishing robust and resonant processes and procedures that bring transparency to complexity.
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For over 20 years, CJC’s award-winning Market Data Commercial Management team has provided global solutions to a diverse client portfolio via operation centres in London, New York, Hong Kong and Singapore.
CJC provides solutions and services to help clients solve the complexity of managing all commercial aspects of market data. By providing bespoke solutions tailored to clients’ business focus and strategy, CJC enables clients to adopt and implement industry best practices.
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