Star Turn: Data Management Vendors Take Center Stage as Financial Transparency and Risk Management Are In Vogue

Walking the floor at the sweltering and much-smaller-than-ever SIFMA Tech 2012 conference and exhibit in June, it was fairly easy to see that there were two "themes" that dominated the show: low latency and data.

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Low-latency technology, surprisingly, still had a strong presence, despite the fact that fewer and fewer firms are competing in the ultrahigh-speed arms race. "Low latency is the most overhyped concept in the financial technology space," said Steve Sadoff, EVP, global head of operations, services and technology, for Knight Capital during a CIO panel at TABB Forum's MarketTech 2012 event earlier in June. "If you count the number of people who really care about extreme low latency, and you count the number of vendors pushing low latency, it is not a good ratio if you are a vendor."

One industry analyst commented that the number of players at the top of the low- latency race is smaller and smaller each year. Now, he estimates, there are as few as five and no more than 25 serious players in the space. In addition, extreme high-frequency traders traditionally build their own technology, down to the servers and embedded systems, and code their own software, so it is hard to see how all of the low-latency providers will succeed in the long term.

Data, on the other hand -- including big data, data analytics, enterprise data management and so on -- stole the show. The focus on data and the various ways to handle it is not surprising, since good data management can improve risk management, portfolio management, trading strategies and almost every other decision-making process within a financial firm. Plus, data feeds, data technology and data management professionals represent an enormous cost for financial firms at a time when reducing operational and IT costs is paramount.

In meeting after meeting at the conference, attendees discussed ways to improve data management techniques and lower data handling costs. Much of the focus on data management is due to the drive to provide better transparency into financials and to improve risk management techniques to satisfy investors and regulators. New laws and regulations, both here in the United States and abroad, require better insight into a financial firm's balance sheets, and companies are scrambling to comply.

At almost every firm, the struggle to improve risk and transparency stems from inconsistent, fragmented and incomplete data that originates with a financial institution's various business units. The data management problem is decades old, but with profits sagging, firms are no longer willing to continue to spend precious budget dollars on redundant or ineffective data techniques. As a result, firms are looking at newer ways to handle, normalize and analyze data, without breaking the bank.

So, unlike their counterparts in the low- latency space, the future looks bright for data management, big data and data analytics providers, as firms will be focusing on improving their use of data for the foreseeable future.