Data: the need to take out the cost

According to the latest research over half of the world’s population is now connected by the Internet. Most of this connectivity has been achieved within the last decade with the remainder of the modern world likely to have some form of connection within the next decade. This is an almost unimaginable result and sets a base level to which business and commerce will be able to grow. Not since the industrial revolution has business had such an opportunity, where new ideas and new businesses can emerge more easily. However, with this new era of business opportunity come problems that will need to be addressed. For example, the amount of data available will continue to explode exponentially, bringing the need for the ability to search and analyse the data. The only thing worse than too little data, is too much data. Time spent finding the data in the timeframe that it’s needed, will be a headache that will require a great big tablet.

In today’s financial markets we find a microcosm of what will confront the world’s population in the future. The finance industry does not lack data. You can find data suppliers all over the world. Some are retailers of data already created, whilst others are agents of the initial data creators. All data has a sale and resale value although you would struggle to find a price discrepancy between any data provider as they tend to provide a service or coverage differential and coverage is a diminishing feature, as data can be quickly and easily introduced via the web.

Market participants acquiring timely, accurate and complete data includes Brokers, Wealth Managers, Fund Managers, Custodians and Market Makers who all are interconnected through business and operational relationships, on a global scale. At the bottom of the data chain is the investor. Whether through direct investments or via insurance or pension funds everyone is part of the data chain, so it is in everyone’s interest that the top to the bottom of the data chain is efficient and cost effective. But what would this mean? It could mean that some organisations that are part of the data chain need to be eliminated from the process. Why should a data provider make a profit from data that is readily available in the market? Is a service differential enough to keep the data provider in situ?

When data is a free commodity it appears ludicrous that any data chain should exist and the problems within any chain nearly always start at the top. The ‘rubbish in, rubbish out’ term suits best here. Why not get the initial data accurate and make it available on the web for zero cost? Those firms looking to stay in the data chain would need to reengineer their business and operations to offer customers other services. May be these services would be based more on sifting and searching, rather than the data itself.  This would eliminate the need for financial services firms to buy data more than once and negate the need for data cleansing or scrubbing as it is sometimes called.

All this and more will be debated at the next Post Trade Forum on Risks in Corporate Actions with the vote on Technology vs. Standards to achieve the greatest ROI. The panel  which includes Daniel Thieke, Vice President, Depository Trust & Clearing Corporation (DTCC), will be able to provide an update on the initiative in the US to provide data from source.