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Is the reference data disconnect getting worse in the capital markets industry?

To better understand this problem, we surveyed 133 buy- and sell-side professionals.

What were you hoping to find out through the survey?

With legacy built-for-purpose silos that often don’t align, firms are spending millions of dollars on reference data from multiple sources in disparate formats, which requires continuous cleansing and reconciliation. Despite significant effort and billions in expense across the industry, these problems have not been resolved, and in many ways seem to be getting worse. To better understand this problem, we undertook a study of 133 buy- and sell-side professionals globally.

What were some of the most significant findings of the survey?

Ten challenges emerged across four key themes:

  • Quality – despite significant investments in time and money, quality issues continue to plague the industry.

  • Costs – shrinking margins require increasingly creative approaches to managing costs.

  • Control – regulatory requirements are driving ever-increasing burdens for proving effective control processes.

  • Change – firms continually struggle with balancing streamlining business operations while responding to continual industry change.

Can you talk more about costs—what did survey respondents have to say about it as it relates to data management?

Study participants highlighted three categories of costs that were of concern:

  • Internal costs: Control over internal costs is ranked as one of the top three issues, yet 36 percent expect operating costs and 37 percent expect IT costs to rise over the next 12 months, versus 14 percent and 15 percent expecting decreases, respectively.

  • External costs: External data licensing (vendors and exchanges) makes up 33 percent of the overall reference data spend, totaling over $2 billion across the industry. Almost half of the respondents expect that number to increase as data demands rise and providers become stricter with their licensing.

  • Infrastructure and platform costs: While not as urgent as other cost areas, firms still face cost reduction pressures. Thirty-four percent of respondents are managing multiple infrastructure platforms for reference data and 38 percent see their costs continuing to rise.

What are some solutions to bring the potential for cost savings, improved data quality and shared best practices?

Market utilities are gaining interest in the marketplace as a primary cost savings function driven by the realization that reference data is non-proprietary and non-differentiating in terms of product or service delivery. In fact, our survey results show that only 11 percent of respondents are actively considering implementing a utility, indicating that the challenges are more deeply ingrained within their organizations.

To date, most reference data solutions have been reactionary in nature, driven by regulatory change or business need and constrained by the desire for real- or near-time results to satisfy quarterly financial goals.

Alternatives need to be considered across the entire cost spectrum and over a longer-term time horizon.

What can professionals do now to solve the reference data disconnect?

For starters, professionals can define the data vision, establishing a strategic vision for what data is required to support the company strategy, how data will be managed by the business and how it will be enabled by technology. They can establish data policy and governance, deliver data fixes and a delivery program and establish data services for the business.