Market Data Optimisation (MDO)
Authored by: Keith Delmarco, Global Head of Data Management, Hatstand (a Synechron company)
Data, including market data, is the lifeblood of any financial institution. But it is also potentially the Achilles heel; resulting in operational risk due to unknown data quality, unmonitored data flows and the lack of user understanding regarding market data IP and contractual usage.
With escalating, and often unnecessary, costs of market data combined with the increasing regulatory focus on the quality, accuracy and end to end auditability, institutions are recognising the importance of introducing robust governance processes around usage, consumption and distribution.
Keith Delmarco, Global Head of Data Management, Hatstand, a Synechron company, explains the importance of Market Data Optimisation in reducing risk, improving regulatory compliance and driving down operational costs.
Historically, large financial institutions have believed the enterprise distribution network was the most important aspect of the organisation but times have changed. Post the 2008/2009 financial crisis regulators are demanding ever tighter controls over the quality with the introduction of policies like BCBS 239 and aspects of Dodd Frank and MiFID II, organisations are increasingly recognising that their most valuable asset is their data.
The challenge is that in the vast majority of organisations' data usage is not properly controlled as to its ownership, usage, shelf life and meaning and is often misunderstood. At the user level, data can be mis-used and incorrectly distributed as many do not understand the underlying market data contracts, intellectual property (IP) rights, or usage restrictions. At the enterprise level, there is inadequate visibility over the full extent of market data contractual commitments that span multiple suppliers for the same data – or the way in which those aggregated data sources are being consumed.
Since market data is typically the third largest line item on any institution’s balance sheet – after staff and real estate – a powerful combination of regulatory pressure and shareholder value is prompting growing numbers of financial institutions to take a second look at the quality and value being delivered as part of an overall data governance model.