Dec 10, 2020
For those who follow trends in market data, the rise of cloud marketplaces has been a key development. While Xignite has employed this model since 2008, numerous data vendors and cloud providers have in recent years launched their own offerings – AWS Data Exchange, Snowflake Data Marketplace, and Open: FactSet Marketplace are just a few examples. This momentum has led to much discussion as providers look for innovative new ways to deliver their products while customers consider how to best leverage this model.
Recently, I had the opportunity to moderate a panel on this topic at a webinar hosted by the Financial Information Services Division (FISD), an association of the Software Information Industry Association (SIIA): “A Marketplace for Market Data in The Cloud,” featuring industry experts from AWS, FactSet and Vela. While these firms play different roles in the market data ecosystem, there was a clear consensus that the efficiencies offered by these marketplaces are poised to have lasting effects.
After years of discussion within the financial services industry, the general benefits of the cloud are well understood, and these apply to market data. The cloud enables reduced costs, faster time-to-market, and endless scalability, all of which enabled Xignite to handle over 12 billion API calls per day at the height of volatility. However, cloud marketplaces offer their own specific benefits that have only recently become hot topics among market data professionals.
These benefits are numerous and diverse, but the common thread is that they help to alleviate the inaccessibility that has historically made market data such a pain point. Instead of going from provider to provider, taking stock of their unique offerings, and maintaining multiple relationships, customers can leverage one vendor for a wide range of market data needs. Cloud marketplaces also eliminate the need for archaic on-premise data centers, licensing agreements, and the other logistical challenges that take resources away from actually using the data to generate insights and achieve differentiation.
This is key because cloud marketplaces enable access to so many different types of data available – historical data, alternative data, sentiment data, filing data, income statements, and much more. In addition to providing access, they provide an opportunity for customers to take stock of all available options, which is difficult to do when there are hundreds of different providers and a thousand other tasks to get done. There is still room to grow, but even at this relatively early stage, the breadth of these marketplaces is a primary benefit.
In addition to more typical datasets, this model enables providers to efficiently reach customers in reaction to unexpected events or sudden spikes in client demand. The COVID-19 pandemic provides a stark example of this dynamic. With so much disruption across disparate industries, recent months have seen a huge spike in demand for COVID-19 datasets among companies who want to predict consumer behavior. This has created an opportunity for providers who can make it easier for customers to assess their options. With so much data from so many sources at its disposal, AWS responded by setting up a microsite exclusively dedicated to COVID-19 datasets.
The pandemic has not only fueled a spike in demand for relevant data but also prompted broader questions on how industry firms approach this matter. The volumes and volatility of March and April are powerful examples of how circumstances can change in the blink of an eye, and these companies are realizing the need to be nimbler. One panelist reported heightened demand from customers who want to migrate their environments to the cloud. Sometimes it can feel like the financial services industry evolves at a glacial pace, but the pandemic is causing these firms to ask the right questions and explore how modern technology can lead to market data efficiencies. In this regard, cloud marketplaces can only help.
It’s no surprise that this momentum comes as many of the longstanding worries about the public cloud from a technical standpoint are fading. Security has historically been a kneejerk concern, but the growing track record of this model combined with increasing cost pressures is causing industry firms to educate themselves. One panelist put it best when they said that the security question has been completely reversed, with the public cloud providers now often boasting more security than what their clients offer.
Similarly, there are questions about managing entitlements, control and data licenses in a cloud environment, as well as exchange audits. The simple answer is that this is a non-issue – in fact, this is one area in which the cloud excels. While cloud data is often distributed in small chunks via APIs, providers can conduct authentication and report at scale with no problems. Xignite entitles market data literally a million times a second, so we know this issue intimately and the bottom line is that the concern is misplaced.
With these questions largely settled, the future of cloud marketplaces for market data appears to be bright, with plenty of innovation on the horizon. For instance, while there is a great amount of diversity in terms of the data currently available, real-time datasets are more difficult to come by. The panelists agreed that this will be an area of keen interest going forward.
New commercial models, including increased collaboration among data providers, is another way that these marketplaces may continue to expand and modernize in the years to come. The cloud enables vendors to combine disparate datasets, enabling them to package their offerings in new ways. For example, multiple datasets could be integrated to create a highly specialized feed and API that users could hit directly. This could be done by a single vendor combining two or more of their own feeds, but more exciting is the possibility of different vendors working together to produce a truly specialized feed that enables both providers to better serve their clients.
This might be an afterthought for more technical customers, who may already be doing some of this work in-house, but many firms lack the resources to build robust AI and machine learning capabilities, hampering their ability to derive insights for data. This is a stark example of how cloud marketplaces can serve as a democratizing force in the market data landscape. While there has not been a significant amount of inter-vendor collaboration to date, these conversations are occurring and have the potential to create long-term changes in this space.
With so much potential to ease access, enable self-service, and allow customers to simplify their market data spend, these marketplaces appear poised to continue to expand. We at Xignite have been saying it for over a decade: this is what the future of market data looks like. The rise of these marketplaces is emblematic of the excitement and innovation occurring in this space, and we look forward to playing a continued role in its evolution.
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