It’s time for the investment community to discuss data

One of the most fascinating things about the financial markets is the competition that they generate. There is a constant drive to do things more efficiently, more quickly and at a lower cost. Technology is often a catalyst for this competition, making it possible to trade faster and to create more innovative instruments. It also helps to interrogate data in ways that would have been inconceivable twenty years ago. Technology is also creating a new opportunity for the investment community. There are new sources of data emerging which are every bit as reliable and comprehensive as the information that is being provided by the exchanges and the traditional data providers. Unencumbered by legacy technology and the redistribution charges, these new data sources offer identical corporate actions data at a significantly lower cost. This means that the investment community are now at a stage where they need to look at how they are purchasing this data and ask themselves if there are cheaper alternatives that are just as reliable, and of as high a quality.

Sleepwalking off a cliff

Many service providers and redistributors risk incurring significant additional costs without seeing any benefits by not examining how and from whom they acquire their data. There appears to be a commonly held view that quality data costs what it costs – the ‘it must be worth it’ argument – and whatever the price, it can simply be passed on to end users. In the short term, that’s an easy and appealing route. If the data you’ve got is working for you, and you can pass on the costs in any case, why take up time investigating alternatives? There are two responses to this. Firstly, cost: whether you are buying a car, electricity or corporate actions data, if you have two identical products it makes good business sense to buy the cheaper alternative. Secondly, it’s worth noting that the history of financial markets is littered with organisations which failed to recognise that their clients are also looking at costs, and slowly saw their dominant position whittled away, as clients voted with their wallets.

Enhancing competition

Data provision is now significantly more competitive than it was even five years ago. If we take the example of the corporate actions sector as an example, and we compare the prices charged by one major stock exchange with prices from independent data vendors, it is now possible to subscribe to identical information at half the cost. By combining expert researchers and effective data-mining, the same quality data is being mined and delivered. The new providers are also doing away with additional costs such as distribution levies. They also don’t force service providers and data distributors to surrender the names of the end users who are redistributing the data so that the exchanges can harvest additional licensing revenues from the ‘same data.’   With technology and data changing so quickly, this is absolutely the right time for organisations to be looking at what data they receive, what they use and how much they are paying for it. There are a number of options available that simply did not exist ten years ago, so taking a proactive approach to data provision is likely to pay dividends for your clients, and for your organisation.