Max Bowie: Cost, Regs, Volumes, Analytics to Drive Data Innovation in 2014

Though economic benchmarks fared well in 2013, data professionals are still being expected to meet their firms’ data demands while under severe cost pressures adopted in response to the financial crisis.

“Perhaps the effects of the 2008 market meltdown are still lingering, but it seems our industry is stuck in a time warp. The financial technology industry as a whole needs to realize that the way people are buying and using our products and services will never return to how it was pre-2008,” says David Frankel, president of Edgar Online.

While cost pressures are unlikely to go away, they may be overtaken by pressures from new rules around data management and governance. “There are increasing demands that financial organizations must be able to demonstrate good data governance—i.e., they must be able to show evidence of the provenance and lineage of the data used in all parts of the investment process, irrespective of whether it is sourced from third parties or internally generated,” says Steve Cheng, global head of data management solutions at economic and benchmark data and managed service provider, Rimes Technologies, adding that he expects to see an increase in adoption of cloud-based services from data providers that take over data management tasks from end-users, allowing firms to concentrate on internally generated datasets that can add competitive value.

While cost pressures may hamper true innovation, Empirasign Strategies founder and president Adam Murphy says firms can weather budgetary pressures by repurposing assets and selling them to groups focused on regulatory compliance, where budgets are likely to increase to deal with the regulatory changes described by Cheng, thus turning cost centers into profit centers.

However, cost and regulatory pressures aren’t the only data challenges. The knock-on effect of regulatory changes designed to increase transparency in the over-the-counter (OTC) swaps markets has led to the introduction of numerous new centrally-cleared swap execution facilities (SEFs), each with the potential to contribute significantly to already fast-growing data volumes, and the need for innovation and transparency around clearing, settlement and execution in over-the-counter asset classes, says Emmanuel Doe, president of Interactive Data’s Trading Solutions Group, adding that processes previously performed by phone will now need IT infrastructures to support the electronic data they produce.

There’s plenty of innovation underway in the data industry—but does the industry have the budget and inclination to adopt it?

Drinking from the Fire Hose
The need to capture, process, manage and analyze these growing volumes—from SEFs and other sources—is also vexing many data consumers. But, according to David Allen, vice president of sales and marketing at predictive analytics provider EidoSearch, “2014 is the year we figure out how to drink from the fire hose,” and “harvest the value of raw data” in areas such as risk management, execution, and surveillance, using new search techniques and principles developed in other areas, such as facial recognition, to identify not just relevant data but also correlations between datasets, and to predict outcomes based on those datasets and relationships—such as combining investor psychology and past price trends to predict future price movements.

Philip Brittan, CTO and global head of platform at Thomson Reuters’ financial and risk division, agrees, citing a growing need for analytics to derive “meaningful insight” from evolving datasets such as sentiment analysis, which has “moved beyond just positive, negative or neutral sentiment, now identifying specific emotions such as fear, trust or optimism,” and which “equips traders with a powerful level of insight to help them predict price changes and other market movements.”

Inclination
In short, there’s plenty of innovation in the data industry, which will bring about change in 2014—but does the industry have the budget and inclination to adopt it? Though Edgar Online’s Frankel warns of a “fear of change” in the financial industry, he and the other interviewees all seem genuinely excited about the potential of new technologies to overcome this inertia this year.