The importance of good data management to the buy-side is once again in the spotlight. Earlier this month, the Financial Conduct Authority (FCA) spoke out on the issue. Amongst other things, the UK regulator highlighted that data management remains problematic for best execution: with many firms using inconsistent information and failing to provide evidence of improvement.
Of course, the importance of good data management in the buy-side isn’t limited to trade executions. In an increasingly competitive market, all buy-side firms need to be able to differentiate on the strength of their client service. If a firm can reduce costs, or improve client outcomes through better data management, they will enjoy an important competitive edge.
But the challenge for buy-side firms is that effective data management has never been harder to achieve, particularly when it comes to the management of benchmarks. This is for three reasons.
First, there is more data for firms to manage. Asset managers, for example, are increasingly pursuing diversified investment strategies that are proliferating the volume and complexity of benchmarks data.
Second, the regulatory environment is becoming ever more complex. Regulations such as MAR are imposing new market surveillance and reporting requirements on buy-side firms. These changes will increase significantly the overall data estate of firms, while requiring them to devote more human and technical resources to data management.
Finally, the cost of centralized data management is increasing. In addition to the investments needed to achieve compliance with new regulations, upstream costs are also likely to increase as sell-side firms pass on the costs of complying with the new EU Benchmarks Regulation.
In this environment, firms need to do all they can to increase business agility, beef up compliance and reduce costs. Those that do so most effectively will be at a significant advantage.
For RIMES, good data management is best achieved through managed data services. By replacing the traditional, centralized data management model with cloud-based alternatives, firms will immediately be able to meet the data management challenges of today, and by extension be able to offer better services to their customers.
This is because managed data services are agile by design. The managed service provider takes on the task of sourcing benchmark data and delivering it to all relevant stakeholders within the client firm in a format that is immediately digestible. This enables faster decision making for the buy-side organization.
Similarly, the managed service approach also means that firms are immediately in compliance with all new and emerging data regulations, as compliance is managed by the service provider’s dedicated team.
Finally, through economies of scale, the managed service approach reduces the cost of data management and removes the need for CAPEX expenditure, freeing these resources for reinvestment in value-adding technology, processes or people.
Ultimately, traders and asset managers alike are concerned with executing their jobs to the best of their ability to deliver optimum value to clients. By leaving data management in the care of experts buy-side firms can free time and resources to do just that.