Jun 30, 2021
Being a distributor of market data means sitting at the center of a vast network of relationships. On one side are clients – we at Xignite spend a lot of time educating the industry about the benefits of leveraging the cloud for market data and building out our offerings to meet their needs. Another side is less commonly discussed: the content providers from whom this data originates. While less visible than relationships with the end consumers, meeting the needs of these providers is critically important for vendors of record, and just like with other areas, the rise of the cloud has had profound effects on the challenges and solutions that define these relationships today.
On a recent webinar hosted by the Financial Information Services Division (FISD), an association of the Software Information Industry Association (SIIA), I had the opportunity to discuss the challenges facing vendors of record in the cloud with industry experts from CJC, FactSet and Refinitiv. While our perspectives differed, all agreed that the cloud has not eliminated the challenges of serving as a vendor of record – it has simply altered them.
For example, traditional market data engagements are highly complex – often they involve multiple contracts within the same organization, with only certain departments or a certain number of users permissioned with each one. All of this is on-premise and distributed through terminals, adding a layer of complexity. Content providers monitor usage through regular audits, which need to be requested from the customers, resulting in long wait times made worse by the decentralized approach.
With the cloud, everything is API-based, making it far easier to monitor in real time and access insights in a more granular way. However, as approaches have improved, the demands of content providers have increased in kind. It’s now an expectation that vendors of record will be able to act with greater speed and scalability, all while operating with reduced costs – so while the underlying policies around capturing and tracking may not have changed, the way they are enforced has.
To keep pace, investment in technology is key. While the other panelists, representing legacy firms, cited varying degrees of success in attempting to lift-and-shift their existing systems for the cloud future, Xignite was born in the cloud and pioneered its usage in the market data space. This means we have been able to focus solely on building for the current environment.
For example, while terminals limit the ability for firms to incorporate data into their own specialized workflows, they do provide many functionalities out of the box – particularly around session-based logins, which play a role in upholding policies around concurrent access, identifying user logins, and the like. Instead of building a terminal, we focused on building a robust entitlements system able to handle a huge volume of requests.
That means we built everything ourselves – a mechanism to prevent concurrent access, a usage monitoring system, a policy engine, a complete audit trail. All of these functionalities are absolutely vital to serving as a trusted vendor of record for content providers, and the only way to implement them with scale, developer friendliness and workflow flexibility is to build them in-house. This means technology must be at the forefront of every distributor’s business, for both the benefit of clients and the peace of mind of the data originators. In our case, our microservices-based approach enables us to quickly build, scale, and refine our system, resulting in a great deal of trust with our content providers.
This philosophy extends to all kinds of content, including alternative data and unstructured data. While in some cases the policies around these kinds of data are more relaxed, our view is that data is data. As long as a system is well-architected in terms of defining policies and workflows, you can onboard anything.
The panel also discussed how the ability to more accurately track and report data consumption unlocks significant business benefits for clients, which in turn helps to differentiate distributors. For one thing, the value of capacity management for market data increases sharply when there is a real-time correlation with spend, as information on entitlements and usage can be incorporated into these metrics. This provides a clearer view of the total cost of ownership.
In addition, the cloud enables improved adaptation to contracting and licensing changes, one of the fundamental challenges of serving as a vendor of record. This allows users to translate changes into analytic tool sets to enable cost prediction. Finally, the cloud allows for expanded process automation because all the information is captured in a central location, as opposed to many different silos throughout the enterprise. All of these are examples of how actions taken by vendors of record in the cloud to satisfy their providers can be leveraged to create efficiencies for all entities involved.
Ultimately, it is difficult to overstate the extent to which the cloud has changed how vendors of record interact with content providers. The power of the cloud enables a host of benefits while also raising expectations and demanding more and faster innovation. In many ways, the industry is still going through an adjustment period, but through continuous investments in technology and talent, vendors of record can help build an ecosystem in which all parties can act with greater precision and control – and for data consumers and their users, that is a very positive development.
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