Advanced Trading: How are buy-side firms obtaining and managing their market data?
Paul Charie, Fidessa:
Paul Charie, Fidessa:Typically, there will be more than one supplier used by our buy-side clients. This is due to the breadth and specialization of data they consume: end-of-day prices, real-time and streaming price data, benchmarks, Transaction Cost Analysis (TCA) etc. The providers include traditional data suppliers such as Fidessa, Bloomberg, Thomson Reuters, MSCI, FTSE but also brokers for trading analytic data etc.
The data is supplied by the vendor in a variety of forms: Real-time distributed straight to the desk top or to a server, or for non real-time data by FTP for collection. This data is either piped straight into the front office architecture or placed in a staging area. In the latter case, the staging area may be a specialist third-party data warehouse platform or an internally-created and managed database that will then feed a variety of systems -- back office for fund accounting, front office, performance and risk etc.
Advanced Trading: What are the challenges for buy side firms when dealing with market data? Do they have the right MD management tools to properly do this job?
Charie:The challenges are several and various: Comprehensiveness and completeness (i.e. finding a set of suppliers that cover the whole universe of securities and data attributes per security they require).
Accuracy. How does the asset manager identify inaccuracies in the data? By comparison with the previous day's data with threshold tolerances.
Time windows for processing. The availability of the data from the supplier may not give the buy-side enough time to revalue funds and compliance check before the next trading day commences.
Availability. Some data types are very difficult to source. A classic case is the number of shares in issue. This is key to managing threshold ownership levels, the breaching of which drives mandatory reporting in most regulatory regimes.
Advanced Trading: Do hedge funds get their market data and MD tools from the sell side or from third-party firms?
Charie:The data is sourced much more widely from third-party firms. They will source from the sell-side for TCA and other specific broker analytics and for the current price of OTC contracts, typically.
Advanced Trading: Are hedge funds open to using cloud solutions for their market data requirements and tasks? If not, why not? Security concerns?
Charie:An example of cloud in relation to market data could be Netik, RIMES and SmartStream, each of whom provides an outsourced virtual/cloud/aggregator data provision model. These solutions are slowly gaining traction. Here, as with other new technology service offerings, the buy side has been a conservative adopter.
However, as other parts of buy-side organizations are increasingly using cloud solutions that hold sensitive data (e.g. sales and marketing teams using Salesforce), many of the data security prejudices against the cloud are being removed.
Advanced Trading: Please give us a real world example with a Buy Side client and how you helped them with their market data needs.
Charie:An example of a recent Fidessa buy-side client to which we have agreed to supply market data as part of their front office solution is as follows. The client is a Tier 1 institutional fund manager, based in London and with trading desks in multiple locations.
The consumers of the market data at the client firm are the members of the trading team, who are trading equities and other exchange-traded securities. The users require real-time pricing data from multiple exchanges in multiple time zones to assist in their trading function. Fidessa is sourcing and distributing a set of real-time data, that is customized at the individual user level, from its ticker plant. The ticker plant sources the prices directly from UK, EMEA, US and Asia Pacific exchanges. The data is distributed directly to the users' desktops against an agreed Service Level for latency and availability.
Stay tuned for Advanced Trading's February cover story on Market Data and its role inside today's Hedge Funds.