WFIC Diary Day 3: Data Industry Begs for Change

On the final day of industry association FISD's World Financial Information Conference, panelists stressed the need to adapt, whether in preparation for regulation, or in response to new technologies on the horizon, or to respond to competitive pressures.

A prime area for change is data usage and distribution policies, as end-users expressed frustration at still having the same discussions about this topic, and urged exchanges to look beyond counting usage by individual users and to adopt more consistent auditing standards to ease the administrative burden of subscribing to exchange market data.

A speaker from one investment bank even went so far as to say that exchanges seemingly do all they can to encourage firms to trade on their platforms, while doing all they can on the data side to discourage customers from using their data.

Exchange representatives acknowledged the challenge, noting that policy changes always lag behind advances in technology, and that exchanges are reacting to the new and different ways data is being used-for example, by offering more flexible pricing models.

However, end-users said that the administrative burden arises from the complexity of managing different pricing models from multiple exchanges, and the lack of consistent auditing requirements may mean that banks develop inventory management systems geared towards the strictest rules to ensure compliance across the board, and therefore overpay some exchanges.

To help ease the burden, end-users called for exchanges to develop a universal standard so that a firm can undergo a single audit that encompasses all exchanges, though an exchange executive noted that the different policies adopted by exchanges reflect their individual business strategies, adding that it would be a challenge to have all exchanges agree to a single standard.

Though this debate seems to remain at an impasse, other panelists continue to assert that the industry must focus on adapting to meet new challenges and deliver value. One consultant said that for a data vendor to have a viable profit model, it must deliver unique content, such as proprietary news or indexes, and unique capabilities, such as visualization tools to assimilate data quickly.

A speaker the previous day had said that industry must innovate to avoid becoming the frog that allows itself to slowly boil to death in a pot of water, and a panelist from a data provider today noted that the music industry had initially feared Napster, before recognizing it as a cry for help from consumers. Once the music industry adapted itself to serve consumers' needs, it has continued to thrive, and it is time for the data industry to do the same, the panelist said.