Market data serves as a cornerstone in the financial industry, empowering banks and financial institutions to make well-informed decisions, streamline operations, and remain competitive in dynamic markets. However, the utilisation of such data entails significant challenges, particularly regarding cost and transparency. High fees imposed by data providers, coupled with the intricacies of tracking actual data usage, often lead to substantial overspending and strained relationships among stakeholders.
In response to these challenges, new solutions are emerging to optimise market data management and enhance transparency between providers and users. Among these developments, qualified timestamping stands out for its ability to deliver reliable and incontestable traceability of financial data consumption.
This article delves into the issues surrounding market data usage and explores how qualified timestamping addresses them. We will examine the tangible benefits of this solution for financial institutions and data providers alike, as well as how its integration into service agreements can positively transform the financial data ecosystem.
Table of contents
- Market data costs: a significant challenge for all stakeholders in financial data services
- Specific benefits tailored to the different market players
- Qualified timestamping: a guarantee of the reliability of market data consumption
- A recommended clause in financial data service contracts for greater transparency
- Technical expertise at the service of the market
Market data costs: a significant challenge for all stakeholders in financial data services
Market data has become a critical financial concern for banks and financial institutions. These datasets, provided by specialised platforms such as Bloomberg, Thomson Reuters, S&P Global, and ICE Data Services, are indispensable for the effective management of transactions and trading operations. Priced based on the number of users and the type or volume of data consumed (financial analytics), they represent a substantial investment.
Market data services grant financial institutions access to a wealth of strategic information: pricing, order books, bid/ask spreads, and market volumes. These real-time financial data streams enable comprehensive financial analysis via platforms such as FactSet, CQG, or Morningstar. The pricing model, based on user numbers and data characteristics, underscores the significant financial outlay required from institutions.
Audits conducted by market data providers frequently reveal considerable discrepancies between actual usage and the terms outlined in contracts. Financial institutions are often required to pay outstanding sums, frequently augmented by penalties. The mobilisation of internal teams to compile the necessary documentation for these audits further exacerbates the already high costs of market data services.
This situation has repercussions across the entire financial data services ecosystem. Users face unanticipated expenses and increased administrative burdens, while providers experience a deterioration in commercial relationships, often strained by disputes over invoiced amounts.
Specific benefits tailored to the different market players
For Heads of Market Data within financial institutions, audits present a significant challenge. These professionals must not only manage the direct costs associated with market data but also anticipate and prepare for audits, which often demand substantial resource allocation. The workload linked to collecting and analysing consumption data significantly impacts the operational efficiency of their teams.
Market data audits require meticulous organisation on the part of financial institutions. Dedicated teams must examine all access points to financial data to reconstruct a detailed usage history for various users. This task becomes even more onerous when an institution relies on multiple real-time data providers. Heads of Market Data are often required to coordinate efforts across several departments to compile the necessary verification materials, all while minimising disruption to traders and analysts. This accumulation of complex responsibilities highlights the pressing need for an autonomous traceability system.
On the providers’ side, Heads of Licensing face recurring disputes over billing amounts. These challenges create tensions in commercial relationships and necessitate the establishment of time-intensive verification processes. The difficulty in definitively establishing actual data consumption complicates contract management and impedes the effective monitoring of compliance.
Qualified timestamping: a guarantee of the reliability of market data consumption
The qualified timestamping solution developed by Evidency directly addresses the challenges of market data audits by providing precise timestamping of financial data consumption and user numbers. This approach, rooted in thorough market analysis and extensive dialogue with European industry stakeholders, fosters shared transparency regarding the actual usage of services.
For Heads of Market Data, this solution offers several tangible benefits:
- It establishes an indisputable record of real-time financial data consumption.
- It significantly reduces the administrative burden associated with audits by ensuring the immediate availability of supporting documentation.
- It promotes transparency, which in turn improves and stabilises relationships with financial data providers.
Market data providers’ licensing managers also stand to gain from this forward-looking solution. Billing is now based on reliable and verifiable usage data, significantly reducing disputes. The audit process becomes more efficient, with direct access to consumption evidence, thereby enhancing the operational effectiveness of licensing teams.
A recommended clause in financial data service contracts for greater transparency
Incorporating qualified timestamping into financial data service contracts represents a natural progression towards securing relationships between stakeholders. This contractual requirement ensures the precise recording of actual financial data consumption through timestamping, thereby mitigating potential future disputes.
This approach delivers dual value: it allows for the precise quantification of market data usage while simultaneously validating the data extraction method. Both parties benefit from this practice, as it fosters mutual trust and strengthens confidence in the contractual relationship.
Technical expertise at the service of the market
This shift towards greater transparency in market data management provides a practical solution to the challenges faced by users and providers during audits. The proliferation of data sources and the exponential growth in exchanged volumes have placed cost control and transparency at the forefront of corporate priorities. In this context, optimising data management and ensuring its traceability have become strategic imperatives for maintaining competitiveness.
Qualified timestamping has emerged as an indispensable tool for controlling the costs associated with financial data while streamlining and safeguarding commercial relationships. Its adoption by a growing number of stakeholders across various sectors demonstrates its relevance in addressing the challenges posed by the data economy.
Evidency, leveraging its technical expertise and deep understanding of the complexities surrounding market data audits, offers a qualified timestamping solution specifically tailored to the needs of financial data services.
The adoption of this solution by financial institutions and data providers has the potential to significantly enhance billing and auditing processes, ultimately optimising market data costs for the benefit of the entire ecosystem.
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