This post was created as a guest blog for Holland Fintech. The original article is published on the Holland Fintech website.
Banks, asset managers, and brokers are facing challenging times collecting financial market data and transforming this into valuable knowledge. Market data fuels a multiplicity of processes in their back- mid- and front offices. And the importance is growing as financial institutions need to strengthen their competitive edge, increase customer loyalty and offer transparency.
Financial market data is even mandatory for reporting to clients and regulators. That is why it is becoming more and more important to get a grip on market data usage, and become fully compliant. But how to achieve this in a world where altering customer demands and new regulations require new data sources with a centralized approach?
Data acquisition challenges
The alignment of data sources can be a daunting task. The data must be imported from a non-standardized file or feed, consequently the data must be mapped to a data model and stored in a database. To create meaningful information, teams need input from different types of datasets to feed their processes and applications. To make it even more complex, they often require a variety of delivery methods and timeliness constraints.
Let’s take the fictional bank ‘Bank24’ to illustrate this complexity. Bank24 services private investors with a broad spectrum of products and solutions. In the online client portal the bank offers private investors a personal overview of their investment account. This includes the real-time value of the portfolio, a breakdown of the portfolio per country and industry, and insights on how companies perform on Environmental, Social and Governance (ESG) themes.
Not only clients require market data to make informed investment decisions. Also the departments responsible for risk or control at Bank24 require data to comply with reporting duties, to assess risks and to monitor market abuse.
A growing variety of market data sources
All the above mentioned activities require clean data from a growing variety of sources. This data is delivered in different formats and through various delivery methods. Most of the data is used in more than one process or application. To add to the equation: data providers make changes to their data feeds and files on a regular basis. To adapt to those changes requires scarce and valuable IT capacity.
In the end financial institutions such as Bank24 pay the price for this nontransparent data consumption and siloed data approach.
Get a grip on market data usage with Market Data Management
To get a grip on market data usage, financial institutions need centralized Market Data Management [MDM]. This is a flexible data model that is able to quickly align new sources but also adds consistency of data to different processes and applications. The model aggregates all necessary data sources with proprietary data within a MDM platform.
This platform offers banks, asset managers and brokers full control over their data and provides them with important insights in the quality of the data. The platform also ensures consistent data throughout departments, applications and processes, so they will no longer have to pay for the same data twice. Instead of maintaining interfaces with all the different data providers. They rather spend scarce IT capacity on the aforementioned challenges to strengthen their competitive edge, increase customer loyalty and offer transparency.
Selecting a Market Data Management provider
As mentioned before, financial market data is used in a multiplicity of applications and processes across different departments within financial institutions. Therefore, when selecting a new Market Data Management provider it is important to have an holistic approach on the usage of financial market data. A financial institution can set up a project team to do the investigation and propose and implement the solution.
There are also specialized companies that can unburden financial institutions throughout the process of selecting and implementing a new Market Data Management provider.
Such companies should also have knowledge on the peculiarities of financial market data next to IT proficiency. Moreover it is important to select a ’partner’ who understands the role of financial market data in achieving the best possible products and solutions for investors.