Since time immemorial, or at least since market data began, financial institutions on the sell side have been on the receiving end of the data game. To acquire essential data, banks employ teams of analysts, and may use tools or third party consultancies to assist with comparing and selecting data sources. Although some firms have started developing tools which deliver partial transparency to vendor pricing, whether it’s product comparison or exchange data pricing, the industry is still by and large a closed book in terms of transparency on data costs.
Change in perception
What if the banks were on a more even footing with the vendors? Imagine if it was a level playing field, with both customers and providers having something to trade? With global regulations coming into play, this need for verifiable data is only going to get stronger. Banks will need to have even more data, with escalating bills and the increased complexity of its usage and management.
What if banks saw themselves as a type of vendor? With something to trade, the conversations with the traditional vendor become more quid-pro-quo, a more equal discussion. A bank’s proprietary data in exchange for a vendor’s aggregated data, feeds and trading platforms, whereby everyone is getting a bit of what they want in return for something they already own?
As banks are getting fed up with paying to receive their own data back from vendors, is it now time for financial institutions to see themselves as niche data sources, by identifying the asset classes in which they hold the strongest hands, and see how this can be commercialised.
To do this, banks first need to identify what data they produce, and how they give it away. Is it given to the right recipient, or is it freely distributed to the public? Who is the caretaker of this process? Is the vendor really taking care of who is seeing a bank’s data? Is it the vendor’s job to do so (this answer is no, in case you were wondering).
By exchanging data between banks and vendors, the market will see an increase in equality of the consumer / vendor relationship, benefitting both sides. For banks, having something to trade provides leverage when purchasing inbound market and reference data, thereby creating a more equal relationship with vendors and potentially reducing data overheads.
This in turn gives all players in the market the best possible sources of data by liquidity.
Vendors also benefit from listening to their customers and giving them richer, more granular data sets, sourced from third parties and original sources. This allows vendors to better understand their customers’ business, thereby provides vendors with valuable insight into which markets, assets and functionality would be of most interest to clients present and future.
The overall outcome improves transparency for the market, which makes everyone happy, including the regulators.