Those on the trading front line have gotten wise in the art of managing the extortionate amount of data the financial market now throws at them. And let’s face it they had to: downgrades and debt crises, shrinking trade sizes, shorter windows for processing, pricing and reconciliation are just a few of the factors that have created more data to access, analyze and act upon.
However, as we highlighted on Tabb Forum recently, anyone who thinks this is a sell-side only problem is missing the point. Buy-sides, with their multi-broker strategies and their own alphabet soup of TCA, DMA, EMS and ECN, have been getting closer to the trade for years. What’s more, no regulator, auditor, investor or custodian is going to fall for the ‘broker ate my homework’ excuse – as choppy markets make compliance with client mandates that much harder.
Fund managers, like everyone else, need to make sense of and meaningfully use the increased information available to them and importantly understand the impact of sudden market movements on the shape of their portfolio – if only to make sensible decisions about which brokers are delivering alpha and which are relying on the reputation of their star traders. In these volatile times that show no respect for traditional institutions, counterparty risk stalks the markets and renders vulnerable everyone who does not have an accurate and immediate handle on the state of play.
So it’s time for buy-side firms to examine how data works for them and not just from a risk and compliance perspective but in terms of gaining a competitive edge too. If they don’t and their course is anything but smooth sailing, investors and regulators will no doubt be queuing up to find out why.