Four years after the start of the global economic crisis, financial institutions are still feeling the pinch of recession, according to a panel of end-user data professionals at last week’s European Financial Information Summit, who unanimously reported that market data budgets are flat-lining in their firms. But despite the gloomy outlook, the panel agreed there are still strategic savings to made.
With pressure mounting on all departments to cut costs, panelists Tristan Dehaan, vendor manager at Dutch asset management firm Robeco, and Steve Ellenberg, co-chair of FISD’s Consumer Constituency Group and Ipug’s Index Licensing Special Interest Group, urged trading desks to make smarter decisions when deciding which market data products they consume.
“In the good old days, as many people would call it, users would have a variety of products. But today they have to choose the best products,” Dehaan said. Robeco has adopted a budget-neutral policy, meaning that the asset manager will not increase its costs, although he did not rule out product substitution. “From my company’s point of view, we are always looking for opportunity—how do we be more efficient, do we need all those platforms to pump data through, do we need all the datasets?” he said, adding that the firm is forcing end-users to choose between products—which in some cases, may mean choosing a completely new alternative to incumbent platforms.
The panel acknowledged that many product choices are client-driven rather than desk-driven, but advised delegates to ensure that individual end-users are aware of total costs, with Ellenberg adding that “perhaps it is time for desks to consider redefining or restraining their inventory portfolio of index firms.” As well as maintaining communication with clients, Ellenberg said it is important to include market data suppliers in the business planning process. “Explain to them that desks are on the verge of breaking down, and that their products or services are a large portion of costs, so to keep desks running, we need to lower the costs,” he advised.
In the current climate of austerity, the panel agreed that vendors can no longer afford to be inflexible—especially if a rival product can provide the same value or more at a lower price point. “In that sense, it’s the perfect time for the competition,” Ellenberg added, “and personally, I think we should all do everything we can to support new entrants into the market data supplier world.”
For Sean Taylor, director of financial intermediaries for private wealth management at Deutsche Bank, “all that matters here is the bottom line. Data is competing with travel, HR costs and compliance, but nothing focuses the mind more than rubbish data. And if you haven’t got the data right, the impact on your clients and on your costs will effectively finish your business.”
Despite this, Taylor was optimistic that there is an appetite for change. “If we always do what we’ve always done, we’ll always get what we always got—and that means we’re never going to move forward,” he said.