Before we continue, we need to lay the groundwork on what market data management means and why it needs to earn its own attention as a core service for financial services firms.
Market data management is the management and management of market data services and third party relationships that result from the procurement and use of market data by a company.
Market data is a broad term that refers to the financial information needed to research, account for, analyze, and trade financial instruments in global markets across all asset classes.
Market data professionals have long argued that their functional role is a complex, dynamic and vast field that requires specialized skills and tools to achieve the extraordinary value and benefits available. I’ve been doing it. But the scope, skills, and tools needed for success can be unclear to staff who aren’t familiar with market data, leading to debate among companies about where the capability fits best.
Is market data management a high-value technology…or just a specialized procurement function? Does it range from 200 to 400 vendors (offering 500 to 1500 products)? Or? Is it a manageable list of the top 10 vendors (by dollar amount spent)? Is managing market data a complex set of processes managed by skilled individuals? Or is it a basic best practice checklist of steps? Is it?
In all of the above cases, we argue that the former represents a complex contract lifecycle approach, while the latter is a commoditized view premised on a programmatic “production line” mentality. I’m doing it. This “commoditization” approach has been observed recently by several Canadian sell-side firms that have shifted their strategies to a more minimalist approach.
Reduce costs by reducing market data staff. Increasing the market data team’s responsibilities without increasing complementors. Or collapse the function entirely under a broader (less correlated) group.
I often see companies take an overly simplistic view of functionality, considering the complexity involved in three common “myths.”
Myth #1 – Market Data Management is a specialized sourcing function
This idea is highly distracting to market data professionals because it chills the debate about effectiveness, or “how do we apply the minimum standards required for contract negotiations?” This goes against the ongoing strategic relationships that market data teams manage internally (with business units) and externally (with key suppliers). As a side note, one of the authors of this paper led a study of the day-to-day activities performed by market data relationship management teams and concluded that less than 12% of their time was spent on sourcing activities . Contract management, reporting/analysis, and relationship management activities are in the top three, characterizing value-added activities that extend beyond general procurement or strategic sourcing philosophies.
Myth #2 – The primary purpose of market data management is to find cost savings
Too often, market data teams are expected to save money rather than manage relationships and drive effective decision-making. This philosophical difference means that short-term strategies (to show immediate final results) are recommended. Long-term strategic programs (designed to optimize the use of market data services).
Myth #3 – Knowing the top 8-10 vendors is enough to understand/manage market data
Many companies are shocked by the reality that there are over 500 vendors and over 2,000 products worldwide within the market data space. Even if we come to accept that this is true, through the crude “80/20” we still use the top 10 list (comfort zone of available information) as a relevant and representative sample for driving a market data strategy. ) makes me fall back. Argument.
Blanket statements of scope miss the necessary understanding of user requirements, financial obligations, and strategic alignment with third-party suppliers. All of this poses risks to businesses. This risk can only be managed by skilled business and vendor relationship managers with the right tools (such as inventory management systems) and processes (such as service revalidation, change monitoring and tracking, and reporting). Tying staffing and effort to just 10 vendors significantly reduces transparency and a company’s ability to:
Develop effective business management services (user business requirements) Align supply and demand management with the strategic interests of the company Efficiently manage and subsequently optimize market data consumption (and resulting spend) do
Perhaps one of the reasons strong market data teams struggle the most with the value they provide is due to “where” the market data function resides within the company. Not IT, procurement, or finance. It exhibits all three characteristics, with the added dimension of providing advanced relationship management that touches every part of the enterprise. Market data experts act as a liaison between vendors and vendors.
Internal stakeholders (users, technology, operations, legal, finance, human resources, senior management). Due to the wide range of fields involved, companies
They struggle to understand where it best fits, and often end up with the discipline taking on the nature of the group to which they belong. This serves to further strengthen the identity crisis that makes market data management reactionary instead of actively implementing optimization practices.
