The Challenge

Financial institutions commonly struggle with the commercial management of their market data estate. Yet if not properly managed, the increasing complexity of sourcing, licensing and necessary reporting can result in serious challenges around both financial and legal risks. Based on client profiles and our own market research, the key challenges faced by market data consumers can be categorised into the five areas of industry issues shown below.

• 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.

It may be assumed that these risk challenges arise because firms simply lack the dedicated capacity to address them. However, the reality is more nuanced. Almost every one of our clients has dedicated people, functions, tools, workflows and processes to administer their market data estate, yet the challenges remain.

Why do they struggle? What are the specific issues they face and what solutions can be put in place to help overcome them?

Client Scenario

A global financial institution approached CJC to assist with their market data commercial management as part of a business initiative to address costs, which had spiralled past $150m pa globally. As the client had experienced rapid growth over a five-year period, embracing both mergers and acquisitions, they faced a raft of challenges within their market data environment, these included:

1. 1. Dissatisfied Business Stakeholders - Business units believed their internal chargeback for market data services was inaccurate, which adversely impacted their functional P&L. They doubted the cost-effectiveness of the market data spend for their trading and other business purposes. Overall, they did not understand the value of the market data commercial management services function and team.

       

   2. Lack of Cost Management - With cost control initiatives established throughout the institution, it was highlighted that the market data services function lacked governance and process to manage costs efficiently resulting in significant financial risk.

       

   3. Uncontrolled Environment - The quality of inventory, information management and documentation was of a low standard, largely down to operating with limited staff, as well as a high churn rate. This had huge knock-on effects with financial and operational consequences i.e. the inability to forecast spending through inaccuracies in invoicing, contracts, user permissions and accounting databases.

       

   4. Lack of Global Consistency - Many workflows and processes lacked ownership and accountability and were frequently undocumented. This caused confusion between regional teams operating independently from each other, resulting in inconsistencies, particularly with cost reporting for global trading businesses, invoice payments, and contractual negotiations – all involving significant financial risk.

Familiar with the experience and expertise of CJC’s commercial management offerings, the client engaged us to design and implement a solution which would help resolve their challenges, as well as restructure their market data function to operate and scale more effectively and efficiently.

The CJC Solution

Based on an initial evaluation, we recommend a three-step approach:

Discover Phase

The goal of the discovery phase was to understand the current state of the client’s market data environment, spanning the commercial and vendor management lifecycle from initial request to invoicing and through to business reporting.

A significant amount of time was spent interviewing client internal teams and business stakeholders, as well as reviewing internal and external documentation to map out a thorough understanding of the client profile.

Once captured, relevant information was assessed* and summarised, before our consultants benchmarked the results against both industry and CJC best practices. A working report was then created as the basis for the solutions design stage. Key findings are listed below:

Findings

1. Annualised spend on market data for leavers - around $1.5m globally.
2. Inaccurate allocation of market data cost, which leads to inaccurate cost management and GL reporting.
3. Inaccurate permissions on market data, potentially leading to inaccurate billing to business units, as well as potential audit and regulatory risks.
4. Missing invoice payment and auto rollover dates.
5. Transacted invoices missing full approval.
6. Low efficiency with minimal automation.
7. Multiple discrepancies between the Europe and Asia regions around process, workflow, structure, etc.
8. Multiple single points of failure especially when each region/office has its own process.
9. Lack of collaboration and understanding between teams.

Solutions Design Phase

Using output from the discovery phase, the next phase utilised the CJC Commercial Management Framework to revamp the market data operating model into an Effective Data Administration state.

Our Commercial Management Framework is a tried and tested operating methodology designed for market data services. It combines the expertise of CJC and industry best practices with the global experience of our consultants and subject matter experts. The framework comprises the four key areas of focus within a market data function.

CJC Commercial Management Framework

Implementation Phase

The project implementation was over a six-month period, with CJC consultants assisted by the client’s internal staff and stakeholders. The keys to success, which applied to this client as well as other market data transformation projects, are shown below:

1. Business Stakeholder Buy-In

A huge success factor depends on engagement with business units to drive a positive perception of the project and ensure deliverables are aligned with their expectations. A primary example is ensuring that each business unit can articulate expectations of reporting based on their requirements and operating model, which can then be customised into a repeatable format by our consultants which adds value on an ongoing basis.

2. Creating an Agile Environment

Preparing for and dealing with the unexpected is a crucial part of CJC project delivery. One example was a requirement to process and analyse invoices from Asia, many of which were in Japanese, which local staff in Japan were unable to do as they lacked resources and market data knowledge. CJC leveraged internal resources from the Asia consultancy team to translate, analyse and categorise hundreds of invoices, which expedited the environmental clean-up phase while also preventing a potential delay in the project.

3. Efficient Access to Systems and Information

A significant bottleneck for project implementation is securing access to tools such as inventory management systems/databases and other information prior to the start of the project. Failure to do so can cause delays of months rather than weeks. We worked very closely with our client to ensure prerequisites for all activities in the implementation phase were completed on time.

4. Accepting Change

It is common for client staff to resist adopting new processes, for a variety of reasons, which can cause project delays. To deal with this challenge, our consultants worked closely with the client management team to ensure that from day one, relevant internal staff were aware of the long-term value of the project and were clear on their deliverables.

5. Expertise When Dealing With Finance

Communication clarity is vital to the success of any transformation project. Our expertise in Finance means our consultants can speak your language; our broad financial knowledge means that we understand the implications of accrual rules and are able to remedy issues and introduce improvements to the accrual process. In addition, we can bring both transparency and solutions to budget preparation.

Final Observations and Results

This transformation project enabled our client to address and resolve the challenges highlighted at the outset of our engagement. Dissatisfied business stakeholders were brought back into the fold with initiatives, processes and the application of experience and expertise that re-established effective cost management introduced global consistency and significantly enhanced the overall service quality provided by the global market data team. CJC is continuing to partner with our client to assist with further aspects of their market data environment.

The Results

1. $1.5M of cost reduction from implemented initiatives.
2. Cost avoidance of approximately $5M with increased automated procedures preventing contract rollover for the 300+ vendors and service providers.
3. A clean and accurate global database of invoices, contacts and permissions.
4. Integration of inventory management system with HR and finance systems.
5. A new request process management system was implemented with governance controls including business cost approvals and vendor due diligence.
6. 28 global workflows redesigned, standardised and implemented globally.
7. Regional invoices in other languages were translated and integrated into inventory management systems.
8. Business reports were completely redesigned by CJC business analysts and customised on a per-business unit level.

For more information contact us or email [email protected].