Drivers for transparency in market data usage
Market data is a crucial and expensive success factor in the implementation of current business models of financial institutions. Therefore, efficient market data usage plays an important part in ensuring positive economic results for banks and asset management companies. In addition to this, market data owners such as exchanges, brokers, rating agencies, etc. are currently increasing their efforts to audit market data usage in financial institutions, which makes market data compliance ever more important. To increase cost efficiency and to avoid penalties, it is essential to have a clear and current picture of market data usage within a financial institution.
Current situation of financial institutions
The current situation of many financial institutions with regard to transparency in market data usage within IT applications is characterised by the following challenges:
- Historically grown system landscapes often lack a good overview of market data redistribution within financial institutions and also of redistribution across legal entity boundaries.
- Lack of entitlement management and access control in applications leads to documentation gaps in audits.
- Missing regular adaptation of market data subscriptions to the real demand in applications (demand-driven supply) incurs unnecessary costs.
As a consequence, on the one hand financial institutions run the risk of submitting incorrect or incomplete declarations of usage to exchanges and vendors, which may result in hefty penalty fees if detected during an audit. On the other hand, inefficiency is hidden, so that often more market data is subscribed to than is actually used – with a corresponding impact on the cost side.
Market Data Map: transparency for market data flows and market data compliance
By analysing the market data flows into and between applications as well as their usage within the financial institution, the Market Data Map business solution can generate the following benefits.
Realisation of the benefits requires a modicum of organised market data management with enough assertiveness to drive such a cross-departmental issue.
Service catalog for the Market Data Map
- Survey of market data usage and market data distribution by relevant applications by conducting interviews with application owners
- Raising awareness of the rules governing market data usage with application owners
- Preparation of gathered data in a suitable database
- Visualisation of market data flows in graphs while applying various filters, e.g., by data owner or by market data consuming application
- Identification of potential market data compliance issues
- Proposals for correction measures to ensure compliant market data usage
- Identification of potential cost savings and optimisations, e.g., under-use, QoS mismatch
- Moderate and support issue resolution to save costs and establish compliant market data usage
- Establish a regular line process to ensure periodic updates of the Market Data Map in a changing environment after the initial survey
Market Data Map – process diagram