2.0 Data Source Profiling, What to look out for.
2.1 Market Data Vendor Profiling
This is the heart of ‘KYS’, the ability to share knowledge within a Data Governance framework that delivers information on supplier relationships where the suppliers are known AND benchmarked.
There is the requirement to vigorously apply common terminologies and meta data so that users requiring access to information can assess or develop:
This then creates the foundations to create, build, and maintain, the corporate Market Data Asset Register.
In addition, there is a vital link in making such a register a valuable business tool. This is to create performance metrics which are periodically validated to ensure continued quality of service.
(We shall address this is more detail when looking at qualifying the requirements for market data sourcing).
Financial institutions to an extent do profile and qualify their market data vendors, but in limited ways, for instance the corporate Gold Source for Reference Data. However, based on experience there are obvious weaknesses:
2.2 Gold Source Methodologies
The Gold Source methodologies used up to now even by the larger Banks are relatively unstructured and subject to significant discretion at the user level. For instance, each business unit might have its own preferred hierarchy of data, but if there is a data issue, say for a corporate action, an individual is all too frequently able to circumvent the hierarchy without a requirement to explain the reasons why.
It also means there are different hierarchies for different purposes, i.e. one for real time data, and a second for reference data.
The table below depicts a sample reference data hierarchy table based on a ‘medalled’ authoritative source data profile, where:
The principle is simple, easy to understand and ought to be effective. The price or information required for an application will be obtained from the preferred Gold Source. If this price is not available, or there is validation issue, the Silver Source, then the Bronze Source come into play.
This currently provides ‘flat earth’ hierarchies. Good now, inadequate for the future.
A more dynamic organisational approach allows for market data to be sourced, utilised, mapped and tracked from the enterprise level down through the business units to the application.
This is a positive step towards leveraging the data as a true resource, plus meeting internal, reporting, and regulatory requirements.
The table above defines in a simplified display the sources and types of market data available to the business. Preferably with metadata and hierarchical identifiers.
The metadata approach brings a 3D view, searchable, flexible parameters, and tangential relationship analysis when required.
It then needs to be mapped onwards along the flow paths to its real world utilisation, for use within, for instance:
Using Big Data principles with the latest analytical and database tools a financial institution can then identify what data it has access to, for what purpose it is being used, where, and by whom. If necessary to the instrument level.
By linking this information to data sourcing and policies, that financial institution has access to usage, cost of market data, and associated IPRs.
2.3 Creating a Market Data Asset Register
This Market Data Asset Register detailing the complete range of information and sources available to the business becomes a valuable business resource at all levels allowing all users to leverage the universe of available market data, quickly, simply and efficiently, so providing a tangible benefit to the corporate bottom line.
Yet this is not complete. The Market Data Asset Register needs to be combined with an effective contract and document management system under-pinned by corporate standardised file conventions. Most organisations have poor, even non-existent, methodologies for document management.
This should allow permitted users to have access to the contractual terms and conditions relating to permitted usage of the market data services being supplied, and importantly for the contract periods.
The Market Data Asset Register now evolves into a complete Data Governance environment for promoting information as the core business resource to participate in and benchmark financial markets while being compliant with permitted usage.
2.4 Why Profile & Create a Market Data Asset Register
On the one hand, compartmentalisation of information is often necessary to preserve confidentiality, especially regarding commercial and contractual terms.
On the other hand, making information available to a wider audience is usually business positive.
By profiling the information, from whom it comes from, and the terms of usage, combined with controlled access to commercially sensitive within a market data asset register provides business benefits: