What are the key challenges within the fixed income data space right now? Where are the gaps?
Trading firms are increasingly relying on data to inform their trading decisions. Participants can see and analyse their proprietary trading data, but while cross-market data exists, they do not have the tools or resources to see and analyse the whole of the market, which massively limits the value of their analytics.
What issues are you seeing around the fragmentation of fixed income market data, and how can the dots be connected to improve a holistic view for traders?
Fragmentation is an understatement: there are more than 150 bond trading venues across the EU and UK, which results in data being held in many different siloes.
Even where data is brought together, like with Mifid data, it is in multiple different formats, or contains errors or missing data fields. There have been numerous negative comments about the quality of Mifid data, but by using the right logic and tools it can be brought together and cleaned. Only then can real value be obtained from analytics.
What specific problem are you trying to solve?
Participants want to be able to base their analysis on the whole fixed income market and Propellant provides the technological capability to do this for buy-side, sell-side, platforms, regulators and industry associations. Propellant is currently the only data analytics provider that enables firms to analyse a combination of their own proprietary trading data and public data, such as Mifid data.
What impact will a consolidated tape have for data consumers, and what are the hurdles to effective consumption?
The consolidated tape is meant to improve transparency and create a level playing field for the EU fixed income market. For consumers, price is a key consideration, as is ease of access, and robust and resilient technology. If complexity and costs are too high, or the quality proves to be too low, buy-side market participant adoption will be impacted.
What differences across jurisdictions do you see in terms of data usage and consumption, and do these confer any advantages/disadvantages?
Just considering both the EU and UK jurisdictions, divergences will naturally happen as the regulatory framework and underlying data are different. If we add the US into the picture then there are different rules – for example the cap size on bonds and derivatives. All of that increases complexity and costs for the end users. Most participants hope that European and UK regulators will work closely together to come up with very similar regimes.
What are the biggest inefficiencies in terms of data usage (both buy and sell-side)?
In general, people have a high level of knowledge on the transparency rules but a lot of them have not actually worked with big data samples for them to fully understand how they can leverage data in their workflow. It is a major gap. People are surprised by the complexity in understanding and interpreting these new data sets. We provide high touch guidance to all clients focusing on explaining rules on market data transparency and how our technology can be best utilised. But once our clients have understood, they are able to see how this can improve their workflow.
Why is there a demand for data services like this, and are they scalable?
Up to this point firms have relied on their own data or they have bought data from one or two platforms. This only provides a limited view of the market. With a market-wide view there are many benefits, such as the buy-side can see which bonds have traded in what size to better inform their trading decisions, and banks can analyse the trades they won and lost, and refine their client pricing.
Although this data is publicly available, three skills are required to leverage it fully: business, regulatory and technology. It is hard for firms to bring these three resources together in a project. This is what our technology services do for them: provide a specialised solution to address this problem. We leverage the benefits of the cloud infrastructure to provide our clients scalability on demand.