Navigating New Markets: Data Management
Transitions in the wealth management industry require consideration of the operational and regulatory obstacles in expanding into a new market, in particular when extending to international equities. Data management is an increasing focus for wealth management professionals, as international equities business and sophisticated clients require data access and quality to meet required regulatory standards and streamline business processes. James Dickson, Managing Director of OCG, said “brokers must treat their international equities businesses with the same rigor as their domestic operations.”, calling the industry to seriously consider expansion into international markets.
OCG partnered with Alveo last year in response to the growing industry need, from an operational resilience, business strategy and compliance perspective, for proficient data management. As the leader in cloud-based market and reference data integration and Data-as-a-Service solutions for financial services, Alveo can assist clients to overcome the challenges and complexities involved in new market transitions. Including: Corporate Action Monitoring, Data sourcing and governance and Data cost monitoring.
1. Corporate Action Monitoring
"We have been discussing with our clients the need to source cleansed and enriched data from specialist vendors, who can fill gaps and normalise data formats for cleaner and simpler ingestion to broker systems." – James Dickson, SIAA Monthly.
Alveo understand financial services is getting increasingly data intensive with new data sources and new reporting requirements, and operations need to be streamlined to support data driven strategies. Given the diversity of events and data sources, corporate actions have been a thorny area.
Corporate actions data includes warrant issues, stock splits, mergers or acquisitions announcements, dividend announcements and other capital distribution events. Tracking the relationships between issuer and issued instruments such as the various listings and any issued bonds is a prerequisite. Departments other than asset servicing too need faster access to high quality corporate actions data, including research and the middle and front office as well as client reporting.
Different departments often duplicate their efforts by acquiring and cleansing the same information. Global institutions need a centralised data management facility to maintain this information in a consistent, elegant fashion.
Another relevant point is measuring the effect of corporate actions data on applications such as portfolio management or index benchmarking. Stock splits and name changes are corporate actions which require manual intervention in downstream systems. These business applications should automatically detect corporate actions data and apply rules or formulae to the relevant data. This is critical for reducing operational risk.
Alveo has extensive matching logic for corporate actions and applies a step-by-step approach to secure data quality:
Preparing the source data by determining matching type. Matching criteria will depend on the specific event type.
Matching logic is executed based on the matching criteria and the available data sources. Alveo’s solution comes with a standard matching configuration.
When aggregating data sets, Alveo links between corporate actions, securities and legal entities allowing easy navigation and discovery for users.
Data-as-a-service bundles data management technology and operations to provide quality proofed data sets that easily integrate with customer workflows. The solution sources, compares and validates corporate actions from different data providers. In case of discrepancies, the Alveo DaaS offering provides root cause analysis and issue resolution. The result is a master feed for corporate actions that the client uses as input for its index calculations. Wilshire Indexes required DaaS to scale their customer index range quickly using high quality corporate actions data, UTILISING Alveo’s DaaS to source, compare and validate corporate actions from different data providers.
2. Data sourcing and governance
"Multiple markets and multiple asset classes means more market reference data is required to run portfolios, analysis, and modelling. More data vendors, more complexity in specifying requirements, and more reliance on third parties for core components of your business quickly compounds complexity and cost." – James Dickson, SIAA Monthly.
Market data underpins all processes in capital markets. It is used for price discovery, risk analysis, valuation, investment decisions, collateral management and margin calculations and external reporting. Effectively collecting, aggregating, quality-proofing and integrating this data into business workflows can be pretty complex.
Alveo's Ops 360 is a web-based data operations solution offering full control over the data acquisition, mastering and data discovery process. Ops 360 provides easy access for data analysts, supervisors and other stakeholders to monitor the status of arrival and processing of data feeds, distribution of vetted data sets, and overall insights into data preparation processes. Ops 360 dynamically sources the required market data through a range of prebuilt connectors to data sources. It provides users with intuitive access to validated data sets with full lineage capabilities to research anomalies and answer inquiries from users, auditors or regulators.
Ops 360 provides a bird’s eye view of data flows, from acquisition through mastering and enrichment through to distribution. Starting with an overview dashboard, users can drill down into a historical overview of processes, pick a time slice and zoom in on any date range. The Ops 360 dashboard provides end to end control over data operations including:
Data Sourcing
Data Mastering
Data Quality
Data Access
Data Distribution
Data Analytics
Alveo’s key distinction in the market is their data quality dashboard which provides clients intel into data quality, data consumption, data usage, data cost and data lineage. The Ops 360 service analyses whether client data is fit-for-purpose and communicates transparently an overview of anomalies and necessary context around identified issues.
As James Dickson warns, “It’s important brokers build a data sourcing and governance strategy now, or risk running cost-out programs in 5-years’ time, to untangle complex, immature, and costly relationships.”
3. Data cost monitoring
"OCG has witnessed some buy-side firms experience a 300% increase in market reference data costs in recent years, with whole teams dedicated to market data strategy and acquisition. Running model or discretionary international portfolios in house, without clearly defined strategies for market reference data management, can quickly see costs get out of hand, while market reference data remains unreliable." - James Dickson, SIAA Monthly.
As the volume and number of data sources grows, firms are faced with a triple challenge: efficiently servicing the business by easily onboarding data sources, ensuring regulatory compliance on process scrutiny and, managing and controlling data costs – which often means navigating an array of complex commercial models, data licensing and usage agreements. Understanding and knowing which models are the most optimal requires transparency and controls on consumption and usage, backed by an accurate analytics model.
Alveo provide a cost optimisation solution that when a consumer – application or individual - requests market or reference data, the request is logged and the Alveo solution checks if it can be serviced within certain parameters such as timeliness requirements. If available, then the data is immediately returned. If the request cannot be serviced, it is requested from one or more external sources. The data is received from vendors, is quality proofed and cross-referenced, and subsequently distributed.
Features and benefits
• Monitors and analyses data spend over time to optimise spend and maximise Data ROI, and leverages data already purchased.
• Prevents duplicate data requests.
• Eliminates unnecessary intra-day per-security requests and optimises these calls through field analysis and commercial model optimisation.
• Provides proactive real-time alerts for non-compliant data calls or costly requests with strong controls.
• Optimises vendor commercials and provides data for vendor invoice re-calculation and reconciliation.
• Provides detailed and evidence-based reporting of usage per requestor.
• Identifies sourcing redundancies and unwanted data sets.
• The solution has resulted in an average 33% savings for about 600+ connected applications.
The wealth management industry's transition towards international markets necessitates addressing operational and regulatory challenges, particularly regarding data management. James Dickson emphasises the importance of treating the international equities business with the same rigour as domestic operations. OCG's partnership with Alveo offers solutions for corporate action monitoring, data sourcing and governance, and data cost monitoring, empowering clients to overcome complexities and streamline processes in new market expansions while optimising data management strategies and controlling costs.
This article was a response to James Dickson's article in SIAA March Monthly - 'Internationalisation of market businesses in Australia'. Alveo Technology became OCG"s channel partner in 2023 and offer OCG's clients data solutions and services. Contact OCG for more information.
