At the recent RIMES Forum in Amsterdam, held during the SCREEN Markets conference, representatives of several buy-side firms and other financial services institutions got a chance to provide their input on the data challenges they are encountering.
They spoke about difficulties in information quality, security concerns they have about storing important data in the cloud and the barriers some users have to adopting this medium.
Universal data assumptions
The Forum leaned heavily on work done by Gartner, the world’s leading information technology research and advisory company. Recently, Gartner has challenged three basic assumptions that provide the foundation for data management best practices, which are:
- Data Management equates to Data Governance
- Users can achieve a single version of the truth
- Using a singular approach and centralizing data management is the answer
In order to present the background that supports this somewhat controversial view, RIMES has hosted several round tables across the world, including the one which was recently held in Amsterdam. In order to understand the assumptions that underlie data best practices, it is helpful to know the data challenges that make traditional practices unsustainable, including:
- Proliferation of data types/sources
- Growing volumes and growing detail
- Regulation and compliance
- Security costs rising
The constraints surrounding velocity of data, including concerns about time-to-market and data access, are challenging singular approaches. Alternatively, complex relationships are undermining the idea that data governance and data management are the same. Finally, the diversity of user bases is straining the idea that there is a single version of the truth.
A perfect example of the heterogeneous nature of audiences is the differing needs of those working in the front, middle and back offices of buy-side firms. In the front office, staff members are primarily concerned with setting up their positions and making trades rather than absolute data quality. Timeliness of data is of paramount importance.
In contrast, employees in the middle and back offices prioritize having high-quality data, and may be willing to wait until mid-afternoon to ensure their information is accurate. Trying to solve these challenges using a homogenous data source could be problematic.
Data vendor challenges
While buy-side firms can encounter challenges when they try to fulfill diverse needs with homogenous data sources, they might also run into challenges with their data vendors. The Forum discussed various problems that could undermine the information these companies provide:
- Data vendors change their data formats every two years, on average
- They overhaul their products roughly every five years
- They merge or go through acquisitions, which could change both the physical delivery and structure of data
A few participants spoke to their challenges with data vendors, and one called them out for not always backing up the accuracy of their information.
“I don’t know of any other industry where you can sell something without guaranteeing its quality,” he said. The attendee asked the moderator why regulators don’t check individual vendors who supply the information, instead of going to individual companies to see if they are pricing the securities the right way, when they all have similar financial instruments.
After letting attendees weigh in on their data vendor challenges, the moderator took a few minutes to review control points, noting the different approach that Gartner took.
For example, Gartner emphasizes that companies should not take a singular approach, since they should be flexible and open to not only centralized data, but also decentralized data models that involve both internal and external control.
What buy-side firms can do to prepare
Buy-side firms are currently encountering myriad data challenges, and this situation could potentially become even more difficult since companies may be basing their current information best practices on outdated assumptions.
In this situation, clarity can be priceless, and institutions can help make matters less ambiguous by working with a managed data service provider such as RIMES, which has significant expertise in this space.