Market Data Survey Insights

In a Survey conducted of Market Data Professionals, Sia Partners reveals three major concerns and priorities:

• Managing Market Data spend is a top priority
• Market Data Teams and their leadership have conflicting spend expectations
• Half are accountable for Invoice Reconciliation, a critical element for monitoring and reporting spend

Thank you to all respondents that participated in our Market Data Management Survey. The survey was designed to learn about the skills, general structure, and scope of responsibilities Firms employ in the area of Market Data Management. From the results, a general profile was built to capture the collective characteristics of the market, which we further broke down into their more representative groups - Buy-side, Sell-side, and Firms that manage both Buy- and Sell-side activities. Supplementing those profiles are notable observations when comparing questions.

Three major concerns and priorities could be extrapolated from the results:

1. Managing Market Data spend is a top priority
2. Market Data Teams and their leadership have conflicting expectations of cutting spend
3. Half have accountability for reconciling, reporting and monitoring spend, a sign that many haven’t benefited from adopting best practices

The survey’s findings are consistent with our views on the need for a clear inventory of what market data services a firm uses, validation of their utility, and ability to enforce proper controls and cost management best practices.

Let's explore the results:

• While there was a visible correlation between AuM and Market Data Budget, less clear was a standard or common ratio of Team Members to AuM, or to Market Data Budgets. This is likely due to the distinctly different strategies of buy-side and sell-side participants, but also attitudes towards costs -sell-side are extremely cost-conscious and the most aggressive for having staff seek out savings, while buy-side have a more cost-management focus where transparency and peer comparisons are more critical in their team structure and operational approach.
• Invoice processing (or owning the intake, reconciliation, and authorization of invoices) is a critical point of control in the Market Data Management function. Yet a large number of respondents indicate their teams do not have direct involvement in this process. This point speaks to the depth of spend intelligence we suspect is lacking among most firms who traditionally view invoice management as an AP function. Payment of Invoices certainly is, however reconciling, allocating, and investigating an average 300+ set of them for specialized products is simply unachievable. Without the capacity of understanding and tracking the granularity of services (to the user), quality of reporting/analysis is highly suspect for anything more than a very high level view.
• No more is the above point more evident than with Reporting. In our opinion, Annual or On-demand reporting is a sign of reactive management that is called upon only because it is a special requirement E.g. Budget Planning or unique analysis ordered. Developing systematic reporting requires detailed, complete, and reliable data to perform on a monthly basis. However the benefits greatly outweigh the costs; Business owners get clear, current consumption and spend information, for which they can engage with market data delivery teams on developing strategies alongside a critical operational requirement. As a result, greater confidence can be established where better transparency, and hence high quality decision-making, are the focus.
• A disturbingly large disconnect was observed by Senior Leadership expectations to reduce costs by >5% while Market Data Delivery Teams anticipate a post inflationary increase of >3%. Assuming market data delivery team perspectives are correct, conflict is inevitable as corporate goals are simply unachievable. The question that has to be asked is– Are market data teams doing enough to keep senior leadership appraised of the services, usage, and resulting spend to expect in a clearly difficult contracting economic environment?

The following paints how respondents described themselves:

Overall, market data management teams feel confident in their ability to effectively manage market data, yet no discernable industry standards could be concluded from the survey - the optimal structure varies greatly (e.g. Team size relative to Users or AuM) as did the actual skills/tools employed (e.g. Certification standards, information sources, and systems). Respondents are certainly aware of the practices and processes required of market data management teams, however it is distinctly clear that a variety of interpretations about how to achieve effective cost management exists. The best example being how most anticipate costs to increase significantly, yet they have been mandated by senior leadership to reduce costs by an equally aggressive amount. A properly resourced, skilled, or structured team would be better able to manage that conflict by either being able to meet with senior leaderships expectations, or by altering senior management expectations to more reasonable and achievable levels.