Skip to main content Skip to Footer

TOP 10 CHALLENGES FOR INVESTMENT BANKS 2016


Market Data:
Taking control of the cost spiral

Challenge 10

INTRODUCTION

Since the turbulent times of 2008, investment banks, exchanges and market contributors have undergone significant transformation.

Risk and regulatory requirements, instruments and products have become more complex, and more transactions are automated today than ever before. In this context, market data has become an increasingly critical component for investment banks, touching nearly every aspect of their business.

Recent efforts in belt-tightening across the investment banking industry have exposed costly inefficiencies in market data management, including siloed procurement, ineffective demand/usage management, growing data costs, and inadequate technology for processing and analyzing the growing volume of data.

As a result, many organizations are beginning to recognize that market data management is a strategic function that requires the same level of attention, efficiency and governance as other key areas of operations. Accenture experience suggests that investment banks that have taken initial steps to consolidate data procurement have seen overall savings of up to 20 percent—and additional optimization efforts could potentially double that figure.

DOWNLOAD FULL CHALLENGE [PDF, 522 KB]

2016 GLOBAL MARKET DATA SPENDING

Source: Burton-Taylor International Consulting LLC

A COMPREHENSIVE PROGRAM FOR MARKET DATA

KEY MARKET DRIVERS FOR MARKET DATA NEEDS

Managing external data

As the number of data vendors has grown and the blurring of offerings for external data feeds clouds the landscape, market data management has become a true challenge for investment banks. Ongoing regulatory change and business pressures related to cost control and compliance only intensify the challenge. Faced with ever-growing regulatory burdens, new data sources, and new financial instruments and products, chief operating officers (COOs) are asking themselves how they can control their data destiny.

Many investment banks are finding themselves unprepared to deal with the key issues at hand:

  • Cost reduction across the market data operations cycle
  • The hidden costs of upgrading and downgrading
  • Changes in market data licensing
  • Investments to compensate for existing platform deficiencies
  • New feeds and aggregation technologies
  • Audits by market data vendors and exchanges

A recent trend in the industry has seen a number of organizations taking a holistic approach to market data and market data technology operations. Their goal is to develop an overall strategy based on a “fit for purpose” methodology, meaning they establish requirements and then identify market data sources. Emphasis is placed on how market data is licensed, with preference given to sources that license solely by instrument (as opposed to instrument and business activity). In this way, an investment bank avoids paying for a single instrument for a single user and application multiple times over.

Market Data Transformation Plan

A COMPREHENSIVE PROGRAM FOR CONTROL AND OPTIMIZATION OF MARKET DATA

Source: Accenture Research

CONSOLIDATION AND COST REDUCTION

"Investment banks need to be aware of what data they require, which applications use it and how it is licensed in order to recognize savings."

WHERE TO DRAW THE LINE

Investment banks need a comprehensive market data transformation plan that focuses on creating recurring value and developing collaborative and sustainable relationships among market data vendors, IT and business units. That means accepting that contract compliance audits are the new norm and will be part of the ongoing vendor-client relationship.

A full internal data audit is the first step in identifying usage duplication and redundancies. Ask yourself:

  • Which data vendors are critical to my business and are there alternatives?
    Some vendors have increased prices significantly in the hope of regaining profitability lost during the financial crisis.
  • Is an enterprise-wide contract warranted?
    What is the appropriate data license model and how many licenses do we really need?
  • Is a multi-year agreement warranted?
    What are the costs and benefits of entering into a long-term relationship versus maintaining vendor flexibility? As barriers to entry fall and Internet speed increases, some providers might be losing their competitive edge. Incumbent providers, such as Bloomberg and Thomson Reuters, still command impressive market shares, but others—including Markit, IDC, S&P Capital IQ and ACTIV Financial—are gaining ground.

KEY MARKET DRIVERS FOR MARKET DATA NEEDS

Source: Accenture Research

WHO’S IN CHARGE?

CIOs and COOs need to ask themselves who is in charge and adopt a clear strategy to manage vendors—or risk being managed themselves. The following questions need to be considered:

  • How many data vendors do we currently use?
  • Where is there overlap or redundancy?
  • Which products in our bundle are we paying for but not using?
  • Can the critical products we need be obtained elsewhere at an equal quality and a lower cost?
  • How many licenses are underutilized?

Trying to “do more with less” won’t cut it as a solution. Being armed with real knowledge of your market data environment is the only way to achieve success.



CONTACTS

This content has been prepared by Accenture and is for information purposes. No part of this content may be reproduced in any manner without the written permission of Accenture. While we take precautions to ensure that the source and the information we base our judgments on is reliable, we do not represent that this information is accurate or complete and it should not be relied upon as such. It is provided with the understanding that Accenture is not acting in a fiduciary capacity. Opinions expressed herein are subject to change without notice.