Asset managers used bonds, stocks and exchange-traded funds (ETFs) for their largest market data spend over the next 12 months, according to a new report from the Greenwich Union and SIX released on August 22.
Buy-side asset managers said they expect fixed income market data spending to increase by 13% next year, followed by stocks by 10% and ETFs by 10%.
The fixed income market, in particular, has undergone a transformation in recent years, moving from being highly manual to becoming more electronic through MTFs and direct connections. This increased the amount of data required for participants to perform.
“Trading venues with some of the richest data sets are only just beginning to commercialize their products for end customers,” the Coalition’s report states.
“While the market may not like the price of these data products, the improved quality and ease of use will overcome the psychological barriers that have previously limited some spending. ”
While asset managers only expected spending on alternative data sets to increase by 3% over the next 12 months, 44% of institutional investment managers and hedge funds surveyed by Coalition Greenwich said they would use them as part of their portfolio construction process. Responded that they use alternative datasets.
Although the use cases for real-time data vary across the board, most companies use real-time data within their trade execution and trading operations. The US and UK stock markets rely more on real-time data than other markets due to their heavy use of high-frequency and delay-sensitive activity. Overall, 72% of those surveyed by Coalition Greenwich said they used real-time data throughout the day.
When it comes to choosing a market data vendor, it varies by type of financial institution, a Coalition Greenwich report found. Sell-side firms are typically organized by region, while buy-side firms are organized more by business unit. Asian markets have a more global focus when it comes to market data decision making, while European participants prefer regional market data decision making.
“Our data shows that Europe has more influence than the US when European buy-side firms make global decisions, likely due to their strong expertise in European market structure. “This is likely to reflect regional preferences for which data providers they have,” the report said.
The cost of market data has been at the center of much debate in recent years, both in the UK, Europe and the US, with many industry players arguing that it is too expensive and that too few companies have control over.
Subsequently, regulators around the world began investigating the data market. The UK’s Financial Conduct Authority (FCA) concluded in March that some data markets were concentrated in a small number of companies, limiting institutions’ options and making it difficult to switch suppliers. .
We also found that the data sourcing process, particularly the way data is sold, is so complex that it has the effect of limiting investors’ options when procuring this critical data.
Data accuracy was cited as the number one factor for participants wanting to change market data providers, with 65% of those surveyed saying it was a very big factor. Only 33% of those surveyed claimed that cost was a major factor in switching.
Coalition Greenwich, in collaboration with SIX, interviewed a total of 79 global buy-side and sell-side market participants for this research.
The study follows a similar study by Coalition Greenwich and SIX in June that found data quality was more important than cost. Additionally, in a June survey, 64% of respondents agreed that cloud will become the market’s dominant data delivery method in the next three to five years.
