One of the most fascinating things about the financial
markets is the competition that they generate. There is a constant drive to do
things more efficiently, more quickly and at a lower cost.
Technology is often a catalyst for this competition, making it
possible to trade faster and to create more innovative instruments. It also
helps to interrogate data in ways that would have been inconceivable twenty
years ago.
Technology is also creating a new opportunity for the
investment community. There are new sources of data emerging which are every
bit as reliable and comprehensive as the information that is being provided by
the exchanges and the traditional data providers.
Unencumbered by legacy technology and the redistribution
charges, these new data sources offer identical corporate actions data at a
significantly lower cost. This means that the investment community are now at a stage where they need to look at
how they are purchasing this data and ask themselves if there are cheaper
alternatives that are just as reliable, and of as high a quality.
Sleepwalking off a cliff
Many service providers and redistributors risk incurring
significant additional costs without seeing any benefits by not examining how
and from whom they acquire their data.
There appears to be a commonly held view that quality data
costs what it costs - the ‘it must be worth it’ argument – and whatever the
price, it can simply be passed on to end
users. In the short term, that’s an easy and appealing route. If the data
you’ve got is working for you, and you can pass on the costs in any case, why
take up time investigating alternatives?
There are two responses to this. Firstly, cost: whether you
are buying a car, electricity or corporate actions data, if you have two
identical products it makes good business sense to buy the cheaper alternative.
Secondly, it’s worth noting that the history of financial
markets is littered with organisations which failed to recognise that their
clients are also looking at costs, and slowly saw their dominant position
whittled away, as clients voted with their wallets.
Enhancing competition
Data provision is now significantly more competitive than it
was even five years ago. If we take the example of the corporate actions sector
as an example, and we compare the prices charged by one major stock exchange
with prices from independent data vendors, it is now possible to subscribe to identical
information at half the cost. By combining expert researchers and effective
data-mining, the same quality data is being mined and delivered.
The new providers are also doing away with additional costs
such as distribution levies. They also don’t force service providers and data
distributors to surrender the names of the end users who are redistributing the
data so that the exchanges can harvest additional licensing revenues from the
‘same data.’
With technology and data changing so quickly, this is
absolutely the right time for organisations to be looking at what data they
receive, what they use and how much they are paying for it. There are a number
of options available that simply did not exist ten years ago, so taking a
proactive approach to data provision is likely to pay dividends for your
clients, and for your organisation.
