Konnichiwa and welcome to this week’s issue of Inside Market Data. As I write this, it’s 5am in Tokyo and I’m wide awake. It’s a little bit of jet lag and a little bit of nausea from dinner last night at a restaurant that doesn’t have an English name, in the Shimbashi district of the city. I’m trying to figure out if it was the cow tongue or the fried squid legs that isn’t sitting well with me this morning. One thing that is sitting well with me, however, is the customer service in Tokyo. At the restaurant last night, nobody spoke much English, but the host was unfailingly polite and patient, and made me feel welcome. A local market data vendor explained to me that the Japanese pride themselves on excellent customer service. They even have a word for it—omotenashi—which translates roughly to “hospitality.”
In the capital markets, omotenashi can be a blessing or a curse. When it comes to winning local business, Japanese financial services often go above and beyond to make the customer happy, whether it be wining and dining, or working all hours to provide support and delivering bespoke services. In fact, Japanese customers expect so much that some international brokers have given up trying to win their business at all, and instead focus on serving global clients.
After speaking with a number of market data managers in Tokyo, it’s clear that the issues facing the industry in Japan are pretty much global. For example, everyone was impacted on Friday, April 17, when Bloomberg suffered a network outage that left data terminals in the dark. In Tokyo, the trading day was almost over when the outage occurred, so for most the impact was minimal. “The problem would have been if [the outage had] happened only to you. The good thing is that it happened to everyone, so we could survive,” says a market data services manager at a Tokyo-based investment banking unit of a global bank.
In terms of omotenashi, end-users in Japan say Bloomberg could do better. During the outage, account managers at the vendor stayed in touch with customers to inform them that the outage was being fixed, but could provide very little information about the root cause of the problem, which has since been blamed on “increased network traffic.” In fact, no one here really expects a detailed analysis from Bloomberg about what went wrong. “Bloomberg isn’t in the habit of coming back and providing an explanation,” says a Tokyo-based regional head of market data at a European bank.
Bloomberg aside, there was one other common talking point among end users in Tokyo: managed services. Like most global financial services firms, market data departments in Japan have faced years of budget cuts, and—after trimming low-hanging fruit like duplicate feeds and under-utilized data terminals—are now looking elsewhere to cut costs.
In Japan, liquidity is fairly fragmented. The Tokyo Stock Exchange merged with the Osaka Securities Exchange in 2013 to form the Japan Exchange Group, but there are still a number of proprietary trading systems (the Japanese equivalent of alternative trading systems) operating in region which command a modest five to ten percent market share.
Rather than managing connectivity to all these venues in-house, some end-user firms are now looking at managed services as a lower-cost alternative. By handing over the reins to a managed services provider, firms no longer have to deal with co-location, rack space, exchange networks, native market data protocols and feed handlers, to name a few challenges, which has the potential to deliver huge cost savings. On the downside, nobody is quite sure exactly what the total cost of ownership will be, there are legitimate concerns about moving proprietary data and applications out of the organization, and if a managed services provider suffers a Bloomberg-like outage, it could be harder to pinpoint the point of failure in the supply chain. Nonetheless, given the Japanese fondness for omotenashi, the managed services model could thrive here.
Anthony and James delve into how the systematic internalizer regime is shaping up, and then examine the regtech sector.Subscribe to Weekly Wrap emails