Advanced Trading: How are buy side firms obtaining and managing their market data?
Mark Pesonen, Bloomberg:
Mark Pesonen, Bloomberg:How buy side firms access market data, and where they get data from, largely depends on the fund's trading strategies and their latency requirements. For example, if the fund is trading exchange-traded funds (ETFs), then a real-time feed is needed from exchanges. A market data aggregator, such as Bloomberg, can help firms avoid having to go to multiple vendors or data sources to support dynamic trading strategies.
When it comes to the data backbone, Bloomberg can deliver reference and premium data as a data license arrangement or as a real-time feed. We can address all key data concerns, including accuracy, timeliness, completeness, consistency, accessibility and affordability for a broad variety of business situations.
Regulatory and compliance concerns also require hedge fund managers to closely watch strategy execution, risk and compliance processes, trade settlement and portfolio valuation. Smaller firms sometimes do not have the operations staff required to handle this. To that end, Bloomberg's Hedge Fund Tool Box (HBOX), was designed to help fund managers, traders, operations and compliance professionals, integrate essential front-to-back office tools for equity, fixed income and FX trading strategies. Workflow is entirely managed, from pre-trade to post.
Advanced Trading: When a hedge fund gets started does every trader have a subscription to the Bloomberg Professional service or would a new firm share one or two subscriptions?
Pesonen:Smaller hedge funds and asset management firms are often started by a handful of founding partners with a strategy and a lot of capital investment. The focus for a founding manager is setting up the operation quickly. Choosing the technology and the market data solution is a key component of this set up process.
The Bloomberg Professional service is familiar to many traders on the buy side, sell side and throughout the institutional investment community. It is recognized for the unmatched analytics, data, news, trading, OMS and distribution capabilities, delivered via the Bloomberg Professional service and multimedia platforms. Bloomberg is also known as a market data provider and a trusted technology partner that can deliver an end-to-end, managed solution.
Hedge funds and small to medium sized money managers look to Bloomberg for intelligent means to improve OTC order execution and avoid acquiring expensive and cumbersome data feeds and lease line arrangements. Bloomberg provides real-time data and reference data, analytics, news and other premium content, as well as distribution technology and integration services that create strategic workflow-based solutions.
This approach allows hedge funds to focus on their core competencies and generate alpha from their intellectual property, while Bloomberg manages all of the critical technological and data-related needs.
Advanced Trading: Have market data firms finally figured out a way to charge for data? Is it by the seat, or per view or per trade? Is this still an issue?
Pesonen:Bloomberg's pricing model aligns the value of our diverse market data offering with demand and current usage patterns. Our pricing is also designed to ensure that customers are only paying for the data they need. To that end, Bloomberg runs usage reports, which help customers identify data sets that are not being used so we can tailor an optimized data feed, and pricing, based on what will bring the most value to the client.
Advanced Trading: How do buy side firms manage multiple market data feeds?
Pesonen:In our experience, every firm deals with market data differently. There are a lot of different factors that determine a firm's strategy for managing data; size, geography, the asset types it trades, its trading strategies, latency requirements, security policies, etc. Some firms install massive data management platforms on site so they can manage the data themselves, while others take advantage of managed services. As the volume and complexity of data increases, however, we are seeing many firms gravitating towards managed services, instead of struggling with a 'deluge of data' themselves.
Advanced Trading: What are the challenges for buy side firms when dealing with market data? Do they have their market data management tools in place to properly do this job?
Pesonen:The challenges we see across many firms is that the data management process is fragmented across various functions, causing poor data quality and costly maintenance expenses. Typically, a firm will start out by manually filtering market data using spreadsheets. The firm begins purchasing functional-specific software to help them deal with their growing data demands. They may purchase an accounting solution one year, a separate portfolio management solution another year and eventually add a back-office solution. Each of these solutions requires operational/IT support and may or may not link to each other. Over time the firm starts spending more and more time, and money, on managing data and software, which is not even part of their core business. Bloomberg is in the data business and one of our core competencies is managing massive amounts of data so our clients don't have to.
Advanced Trading: How are buy side firms dealing with storing their market data? Are they content to hand this chore over to the sell side or push it onto the cloud?
Pesonen:In the past, buy side firms managed all their data in-house to ensure their trading strategies and positions were kept secret. With the current market conditions and impending regulations, many firms are exploring managed services and leveraging cloud technology to help reduce costs and gain operational efficiencies. Bloomberg has been using secure cloud technology for the past 30 years to acquire, store and distribute data, both internally and for our clients. Now, the Bloomberg Enterprise Products & Solutions team is looking to leverage these internal cloud-based capabilities for customers.
We are seeing firms start to move portions of their non-proprietary data to the cloud as they become more comfortable with the practice and provider options. A hybrid solution is growing more attractive to security conscious firms who want to test the waters of the variety of cloud-based offerings.
Are buy side firms open to using cloud solutions for their market data requirements and tasks? If not, why not? Security issues? Client confidentiality?
Pesonen:Some firms are happy to store data in the cloud, while others are less comfortable with that approach as it relates to proprietary models or algorithms. We've noticed a shift recently. More buy side firms are becoming comfortable outsourcing even some of their most sensitive data to the cloud, particularly when they have confidence in the security and integrity of the vendor. However we notice clients are increasingly requesting a hybrid solution where they place some of their less sensitive data in the cloud, and store proprietary, and highly sensitive data, internally.
Please give us a real world example of how your firm helped a buy side client (you don't have to name them) with their market data needs. What market data challenges did they have and how did you help?
Pesonen:A mid-sized, global macro hedge fund with approximately $200 million in assets under management was looking to develop a proprietary risk management application requiring both real-time equity and fundamentals data, for balance sheet, income statement and cash flow statement items. At the time, the fund was leveraging a competitive feed solution incapable of offering the scalability required for a growing fund.
Key drivers in their decision-making process included:
1. The fund's requirement to obtain larger quantities of diverse data sets2. To distribute content (i.e. Bloomberg premium and exchange data) to Bloomberg and non-Bloomberg users
3. And better manage total cost of ownership.
After an in-depth consultation, Bloomberg was able to address these needs by implementing the Bloomberg managed B-Pipe solution. By leveraging managed B-Pipe, this fund was able to provide the same premium data sets available to Bloomberg users today via the Bloomberg Professional service, while serving the non-Bloomberg users with exchange and contributor content -- all from one managed technology.
Overall, as this fund looks to expand their global footprint, Bloomberg's managed offering is well positioned to provide continued flexibility, scalability and cost-savings.
Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining Advanced Trading, he served as editor of Waters, a monthly trade journal ... View Full Bio