Given the industry in which we work, it’s easy to forget that data isn’t the be-all-and-end-all, but rather a means to an end. After all, what is market data but the price tag of a security or derivative that you want to buy or sell? And when we talk about regulators’ focus on data, we’re really talking about its ability to increase transparency. Regulators aren’t interested in the data itself, per se, but in what it says about the activity of market participants.
For example, the partnership between Chinese broker CCT-BGC (a joint venture between China Credit Trust and interdealer broker BGC Partners) and vendors Shanghai Wind Information and Sumscope to distribute Chinese bond data isn’t just about broadening the content carried by those vendors (though it does that) or even about increasing BGC’s revenues from data sales (though it does that, too); the jewel in the crown of these deals and those like them is that they make executable prices more widely available, and potentially bring a new raft of trading business to the broker.
Similarly, MTS Markets’ addition of market depth to its HTML5 BondsPro trading platform isn’t just about showing off how much data it has, but about encouraging more trading on the platform, which serves retail and institutional traders alike. However, these institutional clients typically want to see greater volumes than exist just at the best bid and offer, because they often need to pick off trades posted at multiple levels of the order book—paying a tradeoff of not getting the very best price in return for achieving the volume required to fulfill a large order. By adding the 10 best bids and offers, those institutional firms can be more confident of being able to fill their orders, and are more likely to trade on BondsPro rather than taking their trading business elsewhere.
In a different but similar vein, the decision by Nordic data vendor Infront to add UK-focused newswire Alliance News to its data terminal also has an ulterior motive beyond simply making its products as comprehensive as possible. In this case, the move is designed to complement an existing push into the UK market by providing London-based traders and investors with a UK-focused news source that will make Infront’s products more relevant and enticing, and more practical for a UK audience that might be looking for alternatives to premium terminal products but ruled out those without relevant UK news. In particular, Infront will be looking to capitalize on not just recent volatility in the UK market, but also on the fact that the London Stock Exchange has just sold its Proquote terminal business to Australian vendor Iress—because firms often reevaluate their purchasing decisions when faced with such changes.
And S&P Capital IQ’s decision to add data from rival ratings agency Fitch isn’t because S&P likes giving business to its competitors, but rather because it realizes that customers are going to want access to all the big three ratings agencies, and that by providing access to content from Fitch and Moody’s in addition to that of McGraw-Hill stablemate S&P Ratings, the vendor is ultimately making its platform more sticky and is (in theory) retaining business that might otherwise look for those other ratings elsewhere.
Meanwhile, MUFG Fund Services’ use of Markit’s bond prices isn’t just because the vendor’s data is cool (though I’m sure it is), but rather because by combining it with data from other vendors, MUFG can calculate more accurate net asset values for its fund clients. This isn’t just about MUFG providing better client service; it’s also about those clients being confident in what they report to regulators, and also about their ability to conduct business and attract investment based on their NAV.
So what’s my point? A data deal isn’t just a data deal; it’s a business deal—and by that, I mean that any investment in data is an investment in your business. Simply put, a data advantage isn’t some obscure technicality that only excites geeks in a small, dark room reserved for data processing tasks; a data advantage is a business advantage, and should excite everyone.
James talks about his trip to Chicago and some of the interesting topics that came up (including a look at disaster recovery demands). Then Anthony and James touch on ISDA's initial margin rules, with Phase 3 going live next year.Subscribe to Weekly Wrap emails