Speed and compliance dominate data market

Despite consolidations and rationalisations, user firms are paying more for market data than ever before, according to speakers on a panel entitled "Small change: A look at market data spending" at sister publication Inside Market Data’s Europe conference in London last week.

While there is demand for specific types of data, the focus is mainly on speed and on compliance with new regulations and exchange audits. Panellists agreed that coming second often means losing money, so firms are willing to pay a premium for the very fastest market data.

”It’s a zero-sum game. You are either the fastest or you’re not and you will be taken apart,” said Philip Enness, global manager of financial markets data management at IBM UK. “There’s lots of market data noise. Demand is changing from one-size-fits-all to specialised data. And clients are paying a premium for market data, with a focus on the business side, such as licensing costs.”

Another key area of spending is consultation and compliance with increasing numbers of data usage audits by exchanges, according to Janet Simpson, senior consultant with London-based consultancy BCS Group. Meeting the demands of new regulations such as the European Commission’s Markets in Financial Instruments Directive will also affect spending trends, warned David Bilbe, European commercial director at Thomson Financial.

In terms of overall spending, user firms’ highest expense is now market data-related issues, second only to personnel costs. Firms therefore want to be sure they are getting the most value for money, according to Bill Noorlander, a partner in market data consulting at BST America. But Noorlander said the main issue is not getting the costs down, but rather to find the most appropriate service for customers, who are generally willing to pay for something suitable. To accomplish this, it is crucial for vendors to sit down with managers and senior people to understand their data needs, he said.

Panellists agreed that cost levels will continue to rise due to the persistent demand for market data. However, they also raised possible future alternative billing models, such as pay-as-you-go data, or circumstances where data becomes so commoditised that it is provided free, with consumers only charged for other services.

”When the first vendor moves to providing data on a usage-based pricing model, we will see the market change, and others will follow,” predicted Enness.