Users Cut Costs Through Technology and Negotiations

Due to space constraints, this is only a partial transcription of the morning roundtable of market data executives. One of the major themes of the session was cost rationalization. Here is some of what the executives had to say about that subject.

The panel: Lars Bruinsma, global market data manager, ABN Amro; Margaret Hibschman, global IT product head, Barclays Global Investors; Dan Martone, senior vice president and global head of market data operations, technology infrastructure, Citigroup; Andrew Hunt, vice president, global head of market data services, JP Morgan Chase; Mike Atkin, vice president, FISD moderated the session.

Atkin: … The initial thought from IMD was to name this session How low can you go. I think the question is how long can this cost containment go? And what does it look like down the road? I have outlined six possible areas with the potential for cost containment.... The first one is the first wave of data rationalization with over-subscription… second is the efficiency of administration and the market data process internally, how you manage it and report it; the third concept is to cut staff in the market data department and the fourth concept is disintermediation--the concept of getting information from sources and integrating it yourself…. Are we done with data rationalization?

Bruinsma: It has not taken effect everywhere, but it is a success in itself.... It is one step, it is an aggressive step in saving. For the future it is not going to cut it because the management will come to me and say you need to cut costs. So you need to look for alternatives, taking out middle-office or back-office people or looking at what you can do with supply or IT services....

Hunt: With data rationalization--this is going to sound a little odd--we have automated a lot of this and we monitor a lot of the services our people use. And if they do not use it we cancel those services, especially with exchanges....

Atkin: so you are monitoring on a fairly close basis. Any thoughts of shifting from subscription to user-based deals?

Hunt: it depends on the product. some products have a user base service. Some other areas are open to consideration that are still subscription-based. On the dis-intermediation question I would say there is still some opportunity for that but it has to be appropriate. where there are timeliness or quality issues you might want to disintermediate and aggregate a direct feed. you have hundred of feeds today and you do not want to have thousands. I do not want to be an aggregator if I can help it, I want to find other sources. However, if there is a quality or timeliness issue I am willing to consider it.

Atkin: …It is still a little bit of a slippery slope on the definition of what is derived data … to what extent are you allowed to do what with the data?

Hunt: The definitions are too restrictive and therefore have to be constantly re-negotiated.

Atkin: Have been too restrictive?

Hunt: They are. They have been historically because they are seeped in old-fashioned contract language that we designed to reduce the loss of terminals....

Atkin: The vendors are acting as actors for exchanges and other data owners so you have a multiple layer chain of policy control…

Hunt: The problem there is that in my opinion they [vendors] need to step up and be true agents.… In my opinion the aggregator should take responsibility for this and they should put in blanket agreements and with the right caveats around the distribution.

Atkin: Plus the whole discussion of data ownership is about to rear its ugly head again.

Hibschman: Well, BGI may not be representative of the industry as a whole, but we started about three years ago and when I took over there was no head of market data, there was not even a team of people devoted to it. So as far as choosing staff we had the luxury of choosing the right number from the get-go.… Disintermediation--this was a tougher question for us, we were not really doctors of XML. We set up with an XML gateway so that everything that comes in to BGI is translated to XML and we are able to move it pretty easily throughout the firm. So disintermediation becomes an option at this point. so as that evolves we may be interested in taking thousands [of feeds] instead of hundreds.

Contract negotiations have been a continuing challenge for us because we are set up globally, and as our technology infrastructure gives us more opportunities to create global capabilities, we are struggling to get the vendors to keep up with us in that regard. For instance, if I have a function in San Francisco that i want to move to Tokyo, i should not have to pay three times for the same users and the same names. We are really struggling to get the flexibility we need from the vendors there....

Atkin: Part of that is still part of the market data rationalization policy because the ability to reconcile multiple access of single users and the like is still in a little bit of flux.

Hibschman: Yeah, I think what you are hearing from us is that our business ... has changed ... and we are not seeing reciprocal changes on the vendor side, which is making negotiations a little uncomfortable....

Martone: … With contract negotiations, we have seen some changes in the landscape of what vendors are willing to talk about with enterprise and global contracts. However, the vendors are not positioned to have those global conversations and still do not have global teams and cannot get all the regions on the same page. You can have a conversation with one region and then another says "I can get a better price," which is great because then I say, "OK, let’s get that price." But it is still not coordinated globally. The landscape is changing--it is no longer New York, London, Tokyo--it is global.

To view a Webcast of the session and the rest of the conference, go to www.insidemarketdata.com.