The Buy Side as Big Data Laggards

Big Data seems to be more of a sell-side issue than a buy-side one. Over the last year, the WatersTechnology brands have produced numerous webcasts, special reports and conferences in an attempt to dive deep into Big Data.

The most recent was Tuesday's Big Data Online Summit—something new for us—a virtual conference with panels, video presentations, case studies, and virtual booths where people were able to chat online with representatives and download information about the exhibiting company.

At the online event, I noticed most of the insight and innovative strategies to tackle Big Data coming from large tier-one investment banks, as well as vendors that cater more to the sell side. This may be due in part to selection bias—we produce these materials and conferences—but I talk regularly with a number of hedge funds and asset managers, and this topic is rarely on the tips of their tongues.

In a virtual chat room I asked someone from Barclays Capital if he noticed the same thing. He said he had, and added that the sell side is going to be “more creative in how they use recent developments in tech and situations." The buy side, it seems, has all but given up trying to deal with the deluge of news coming across their desks ... and that was before Twitter exploded three years ago.

At the same time, sell-side firms have been struggling to come up with new ways to find alpha as equity trading volumes fall, and direct market access cuts into commissions. So it's up to the sell side to lead the charge on this. And the buy side has been incentivizing sell-side firms to innovate by "dangling future commissions” in front of them, the Barclays professional said.

So my question is this: Is it worth it for the buy side to step up its Big Data innovation? After all, a firm that can figure out how to successfully mine and analyze a massive, unstructured dataset could gain a competitive advantage when it comes to communications with investors and in identifying trends and sentiments around which to build a trading strategy. On the other hand, is it simply not worth the expense and resources, considering that buy-side firms are already running on skeleton crews when it comes to IT?

If you have an opinion on this, send me an email at anthony.malakian@incisivemedia.com or call me at +1 646-490-3973.