Ever wonder what keeps your competition up at night? If you work on the buy-side and are either responsible for onboarding/processing data or are an end-user of data, you may like to know misery loves company. Let me explain…
A recent survey of hundreds of buy-side firms around the world found 80% of firms:
- Plan to increase their use of price data and reference data
- Fear more regulation of price data and reference data is coming
- Admit their current strategies for price data and reference data are outdated and inadequate
In short, the buy-side’s demand for price data and reference data is outpacing its data strategies, resources, and technology.
Buy-Side’s Top 5 Struggles with Price Data and Reference Data.
Here is a ranking of data challenges from the buy-side firms surveyed:
- A lack of manpower to find, evaluate, and onboard new data sets.
- Reconciling data from different vendors or sources.
- Incomplete and/or inaccurate data.
- Compliance with existing (and upcoming) regulations.
- Storing and distributing data across the organization.
Let’s dive into these a bit…
Do You Experience Any of These with Price Data and/or Reference Data?
Lack of Manpower: It’s not just about having enough people; it’s about having enough of the RIGHT people. A smart, eager recent college graduate can certainly help you with data. However, you also need veteran data experts who are familiar with the underlying asset, data supplier landscape, and specifics of the data, especially when it comes to alternative data.
Reconciling Data from Various Sources: After 20+ years in capital markets and the data world, I am surprised we as an industry still spend so much time and effort reconciling identifiers between data sets and sources. My company, DIH, helps many firms, big (>$100 billion AUM) and small, map data to their security master. Such work may seem boring until you trade the wrong security or miss a corporate action, resulting in a trading loss or compliance violation.
Incomplete & Inaccurate Data: We all know that no data set will be 100% complete and accurate 100% of the time. I fear less experienced data scientists struggle with this, and instead of doing data science, spend their time massaging their data to make it “perfect”. As a data supplier, DIH relies on both automated checks and human review of data before delivery to clients. The human review is critical and requires data analysts with local market knowledge and language skills. However you check your data, the goal should be to identify and resolve issues quickly.
Compliance with Regulations: There are three certainties in life… death, taxes, and regulation changes. Some of the recent regulations with which buy-side firms continue to work to comply were caused by the LIBOR scandal that broke back in 2012 (e.g. EU Benchmarks Regulation in 2018, LIBOR Transition of 2021). Whatever the regulatory requirements, your overall data strategy needs to be flexible so the relevant parties in your firm can get the data they need.
Storage & Distribution of Data: Addressing the challenges of effectively and efficiently storing and distributing data throughout your organization goes beyond just technology. It requires a strategic change to embrace the cloud. Just over 40% of buy-side firms report storing their data in the cloud. This percentage will continue to grow as firms realize the advantage of bringing their queries, regulatory processes, and analytics to their data in the cloud – instead of the other way around. Embracing the cloud will also improve the distribution of data to all parts of the firm (e.g. front-office, risk management, IT, compliance, etc.).
The demand for price data and reference data is not going away, so your firm’s data strategy, processes, and technology need to be able to adapt. So we can all sleep well at night.
What about you? Are you facing similar challenges? How well are you coping? Please comment – I’d love to hear your thoughts.