Opening Cross: Everything But the Kitchen Sink

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For an idea of the multitude of challenges faced by market data professionals, look no further than this week’s issue of Inside Market Data, which contains a veritable quilt of disparate fabrics and patterns, which data professionals are charged with skillfully assembling to create a coherent, elegant and functional whole.

From identifying new content of interest, negotiating contracts, managing rollouts to users within their firm, and monitoring that use and setting up internal procedures to ensure it complies with the supplier’s contract terms, data managers must be part technologist, part administrator, and 100 percent content expert, with an understanding of all the markets served by specialist groups in their firm.

In recent years, firms have focused less on terminals and more on low-latency feeds. But in the last 18 months, we saw a shift away from writing blank checks for latency-reducing projects, and greater scrutiny of the cost of low latency. Now, there are signs that firms may be willing to spend again, but in a more cautious and focused manner. For example, in the writeup of our recent Latency webcast, nearly a third of listeners said they have not been forced to cancel projects but have reduced their cost, while 18 percent—a significant rise over past polls—said they have increased spending slightly, with the result that more firms are now operating with latency in the microsecond range, and fewer in the low millisecond range—though there is evidence of bifurcation, as the number of firms with high-millisecond latency increased over recent years.

Of course, not everyone needs the lowest latency. At the other end of the spectrum are those—typically in less liquid over-the-counter markets, and especially in OTC energy and commodities markets, who negotiate trades directly with counterparties over instant messaging applications, such as the new FactSet IM messaging tool unveiled by FactSet Research Systems last week to make its workstation “stickier” among existing users by allowing them to easily share information, while also to reach users of other IM networks.

And in between these extremes are those who need efficient consolidated feeds that—while not slow—don’t necessarily deliver ultra-low latency, such as the new consolidated feed of global exchange data being rolled out by S&P Capital IQ, leveraging its own data collection hubs and the infrastructure of French low-latency data provider QuantHouse, which S&P acquired last year.

Then there are some who are just happy to get any feed at all. For example, take European firms waiting for clarification of what form a consolidated tape of pan-European data will take. The European Council, one of the bodies responsible for the details of MiFID-related legislation, has been sending mixed messages to market participants by publishing proposals that appear contrary to previously-stated positions, creating uncertainty for those pursuing an industry-led solution, and ostensibly contributing to the recent demise of consolidated tape-focused think-tank The Coba Project.

While firms already collect pan-European exchange data, a regulation such as MiFID that governs multi-listing and best execution should be accompanied by the tools to support compliance. Besides which, dealing directly with exchanges is fraught with its own challenges, as evidenced by industry association FISD’s new project to rate exchanges’ adherence to certain data best practices, and use these to compare exchanges against their peers, for the purpose of identifying what issue may be a trend among exchanges that requires a broad industry dialogue to address, versus issues that may be unique to one exchange, where the results may persuade an exchange to fall in step with its peers.

Of course, this initiative is being run by FISD’s Consumer Constituency Group of... guess who? That’s right: data managers, who can add statistician and diplomat to all their other competencies.

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