Opening Cross: Empire State Street of Mind

My first love is music (sorry, market data!), and I recently began reading Empire State of Mind, Zack O’Malley Greenburg’s biography of rapper and hip-hop mogul Shawn “Jay-Z” Carter, to find out how the self-confessed former cocaine dealer and rap prodigy turned himself into “a business, man… not a businessman,” raking in hundreds of millions of dollars from a range of business ventures.

In his 2009 anthem Empire State of Mind, Jay-Z cites 560 State Street in Brooklyn as his “stash spot”—a reference to times before music allowed him and his business partners to diversify into other areas. Quite simply, instead of promoting other peoples’ clothing lines or vodkas in his songs, they decided to use the lyrics to cross-promote their own wares. All they had to do was make the clothes, snap up a drinks brand, and voila—free advertising and a willing audience of potential consumers in his existing fan base.

Which brings me to the State Street reference: Because State Street is doing the equivalent in the data world. The Boston-based financial services giant, realizing that its buy-side clients’ data needs are increasing, is “stashing” some of the assets it already has in-house—around research, risk analytics, execution platforms, software platforms and data—into a new division of five business lines to help clients cope with regulatory change, overwhelming volumes of data, and a blurring of some distinctions and data needs between the front and back office. By formalizing these different areas under one umbrella and developing a coherent go-to-market strategy, State Street believes it can cross-sell to its existing client base hungry for more analytics and insight, as well as bringing new business through this data and technology services unit (dubbed Global Exchange) to other parts of the State Street empire.

“Global Exchange is a natural extension of our existing customer relationships. It’s not realistic to say that I’m suddenly going to be able to sell you five services—but hopefully you’ll come to me and I’ll be able to solve some of your problems,” says Jeff Conway, head of the Global Exchange business at State Street.

To shape its services to meet customer needs, the firm has enlisted an outside industry expert—former Thomson Reuters exec Sunand Menon. And interestingly, the five business areas within Global Exchange—Research and Advisory, Risk Analytics, Trading, and Software Solutions, in addition to Information Solutions—aren’t far removed from the structure of Menon’s former employer.

Conway says State Street isn’t trying to be the next Bloomberg. Someone else is, though: Markit, which is working on a new messaging platform to facilitate communication and data-sharing between buy- and sell-side firms, and has enlisted a range of partners among other vendors and the sell side to get the platform running and make it interoperable with other industry-standard messaging platforms, such as Thomson Reuters Messenger. Though Markit has been developing the platform since last year, sources say it has seen a wave of new interest since the revelation that Bloomberg journalists were—until recently—able to access details of some usage information about clients of its Professional terminals. Though Bloomberg has said its reporters could only access limited information, market participants remain sceptical, and are keen to ensure they are conducting any confidential communications as far away from any potential prying eyes as possible.

However, the snooping scandal only provided a brief respite from the ongoing saga of rising data costs. Elsewhere in this week’s issue, we detail how French user group Cossiom is battling rising index fees, as well as how industry body SIFMA is renewing its case against the Securities and Exchange Commission over what it sees as unfair and unlawful exchange fees. Perhaps end-users and their associations could find a way to follow the example of Jay-Z and State Street, and leverage the wealth of internal data they already have to either compete or collaborate with exchanges to create data products that fulfil everyone’s needs.