“Quality over Cost” and 2 More Facts on Using Market Data

Capital markets professionals think about the term “market data” in numerous ways. Most commonly they believe it refers to pricing and related data, including exchange, OTC and third-party pricing, as well as reference data that incorporates fundamentals, ratings, and other descriptive information. However, some also refer to market data as news and research or expect it to include derived data and alternative data. Market data is a broad category, and different requirements emerge depending on roles and areas of responsibility.

How to unlock the full potential of global market data? This is the overarching question of the study exploring key themes, such as the considerations influencing technology and market data vendor choice, market data spending trends, and future expectations for data technology. Here are three key findings:

The vast majority of participants choose market data providers based on accuracy of the data and feed reliability (90%). Other highly valued requirements include data conformity, such as ISINs, conventions, and other characteristics, as well as the reputation of the data provider. This has consequently influenced the desire for greater vendor choice with vendors competing on quality as much as coverage and cost.

Although the cost of data licenses is often a source of criticism, they rank lower on the list of important criteria, especially on the buy side. Sell-side participants are challenged by cost but are still sensitive to performance and quality considerations, like data accuracy, feed availability and timeliness.

The same considerations also affect the willingness to change providers. Here, again, quality prevails over cost.

The cost of market data will continue to grow. While the cost of data (licenses, technical cost, and the use of possible cost-saving avenues such as packaged services) does not top the list of key considerations for vendor choice, companies need to adjust and plan for them.

In fact, the vast majority is planning to invest more into market data. 80% percent of buy-side participants believe data budgets will rise over the next 12 months. Over one-quarter anticipate an increase of at least 5%. Meanwhile, sell-side respondents are expecting larger increases as more data sources are needed and higher frequency of data demands more investment.

Technology, in particular the use of the cloud and APIs, is a central theme to all companies. In fact, they are expecting to consume even more cloud-deployed data, including real-time market data, portfolio management data, and risk analytics in the future. Looking ahead over the next three to five years, cloud stands out as the preferred market data delivery method (64%), with APIs following (46%).

Preferences tied to the cloud are often associated with flexibility, ease of use, lower cost and the speed necessary to get new data up and running, although transition costs cannot be overlooked in the short run.

The sell side has been slower to adopt the cloud than the buy side and, at some point, will catch up as resources and know-how permit. Meanwhile, sell-side participants will focus more on APIs in the coming years to foster market-making practices.

Cloud adoption is a marathon more than a sprint. However, over the next three to five years, buy-side as well as sell-side participants will future-proof their market data strategies by turning to the cloud for data delivery. Its scalability and accessibility will enable organizations to harness vast amounts of data and derive actionable insights.