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Most capital markets firms lack an enterprise big data strategy

Most firms involved in the capital markets do not currently have an enterprise-wide strategy for their big data management, according to a recent industry survey.

This poll culled responses from 423 companies, many of them buy-side firms. The survey, published by Thomson Reuters and prepared by independent research and advisory firm Aite Group, found that if these industry participants have a big data strategy, it only exists in certain areas, such as quantitative research and trading.

“The capital markets have been relatively slow to adopt big data strategies, but they have begun to make some impact in a select few areas of the markets over recent years, including within sentiment analysis for trading, risk analytics, and market surveillance,” Virginie O’Shea, senior analyst at Aite Group, said in a statement released along with the survey.

Summit stresses big data’s key role
The poll released these findings after participants in February’s Alpha Innovation Required summit emphasized buy-side firms looking to outperform the markets must harness big data management to pinpoint trends before their competition does, according to The Trade USA.

The buy-side certainly knows about the idea of gathering massive amounts of information to find actionable data, but generating alpha will increasingly rely on the ability to harness disconnected sets of information. Bill Stephenson, who serves as head of global trading strategy for Franklin Templeton Investments and planned this event, spoke to these developments.

“There is simply a greater amount of data from a growing number of sources that impacts the investment process and asset managers who can best gather, manage, and contextualize this information will be able to make more informed decisions that drive alpha,” he told theTRADEnews.com.

Institutions invest in big data management
While the amount of available information seems to be rising, some capital markets firms are taking steps to keep up with this growth, according to data from the Thomson Reuters survey.

Half of the poll participants indicated they either have a data scientist now, or plan on finding one in the next two years. Employing people with this specific knowledge could come in handy, as respondents identified insufficient technical knowledge as the one obstacle they are most likely to encounter when in the midst of a big data project.

While capital markets firms taking part in the poll may lack a data scientist, 50 percent indicated they already invest in big data initiatives. While only a few asset managers have placed funds into these projects, most hedge funds have taken this step. The survey found that capital markets firms will likely become more interested in big data strategies as examples of uses in their industry grows.

Key role of social media
As buy-side firms increasingly adopt big data, they will find social media to be an indispensable source of the this information, stated several participants in the AIR Summit, The Trade USA.

“Data from social media sources will likely play an increasing role in institutional investing, so asset managers should begin thinking about their social strategy in order to capture and take advantage of the exponential growth of financial related content,” Stephenson told the news source. “The initial key will likely be around the natural language processing of unstructured content within social media in order to automate interpretation and to integrate this sentiment as another variable in shorter-term decision making processes.”

However, Joe Gits, CEO of a company that monitors Twitter and StockTwitz to give investors a better sense of the sentiment surrounding specific equity instruments, emphasized that social media is only one part of the investment process.

Industry progress
While there is a long way to go, industry participants have made progress. Capital markets firms are largely spending money on big data initiatives in front-office activities, the survey found. However, these same firms will likely put money into leveraging big data in areas such as enterprise data governance, risk management and client retention.

“Priority levels for data management and analytics have risen as adoption of electronic trading has spread across different regions and asset classes, and the diversity of data sources and sheer volume of data have increased substantially over the last decade,” O’Shea stated. “In addition to traditional market data, growing interest around nontraditional, unstructured data has also added more complexity in terms of firms’ ability to deal with data.”

Buy-side firms that want to get a better sense of how they could benefit from implementing an enterprise big data strategy might consider speaking with a service provider. Taking this approach could allow them to get a better sense of the costs and benefits involved.

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