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Top 10 Challenges for Investment Banks in 2016: Market data

Beat Monnerat, Accenture’s Senior Managing Director of Financial Services for Asia-Pacific | Jan. 8, 2016
For the eighth consecutive year Accenture outlines ten of the key challenges facing investment banks. On the last day of the series, Accenture advocates taking control of the cost spiral

Read: Part 1 | Part 2 | Part 3 | Part 4 | Part 5 | Part 6 | Part 7  | Part 8 | Part 9

More transactions are automated today than ever before -- and data has become an increasingly expensive commodity. A recent Burton-Taylor report projects spending on market data willcontinue to rise in 2016 and beyond. This is good news for data vendors,but bad news for the rest of the industry.

Business needs and regulatory pressures are pushing the industry to consume more and more data, and data suppliers are getting more creative with how they license and account for data usage. Investment banks are being subjected to frequent usage audits and find themselves at risk of incurring significant fees for non-compliance with current vendor and exchange contracts.

As a result, many organisations are beginning to recognise that market data management is a strategic function that requires the same level of attention, efficiency and governance as other key areas of operations.

Accenture experience suggests that investment banks that have taken initial steps to consolidate data procurement have secured overall savings of up to 20 percent-and there is room for even more savings.

Investment banks need to work with market data vendors, IT teams and business units to make sure their market data management adds value, not cost.  A full internal data audit is the first step in identifying usage duplication and redundancies. Ask yourself:

  • Which data vendors are critical to my business and are there alternatives? Some vendors have increased prices significantly inthe hope of regaining profitability lost during the financial crisis.
  • Is an enterprise-wide contract warranted? What is the appropriate data license model and how many licenses do we really need?
  • Is a multi-year agreement warranted? What are the costs and benefits of entering into a long-term relationship versus maintaining vendor flexibility? As barriers to entry fall and Internet speed increases, some providers might be losing their competitive edge. Incumbent providers, such as Bloomberg and ThomsonReuters, still command impressive market shares, but others-including Markit, IDC, S&P Capital IQ and ACTIV Financial-are gaining ground.

Who's in charge?
CIOs and COOs need to ask themselves who is in charge and adopt a clear strategy to manage vendors-or risk being managed themselves.

The following questions need to be considered:

  • How many data vendors do we currently use?
  • Where is there overlap or redundancy?
  • Which products in our bundle are we paying for but not using?
  • Can the critical products we need be obtained elsewhere at anequal quality and a lower cost?
  • How many licenses are underutilised?

Trying to "do more with less" won't cut it as a solution. Being armed with real knowledge of your market data environment is the only way to achieve success. Being flexible and empowering key decision-makers is critical, and as with all of our top 10 challenges that we have highlighted in this series, data management has to be valued as a series issue by the C-suite.

 

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