Fireside Friday with… SIX’s Marion Leslie

With the topic of data becoming increasingly central to market developments, The TRADE sat down with Marion Leslie, head of financial information at SIX, to unpack the role of data in how trading strategies are evolving, how the buy-side is preparing for a data-driven future, and the regulatory considerations at the fore of the industry’s attention.

How is data being used to make trading more actionable?

The evolution of data has moved on and the focus is now on taking action with the data whether that’s trading, investments, risk management, or anything else – it’s about making a difference with the data. 

Now it’s about how we present data so that it’s ready to use and ready to trade. This includes asking key questions like whether data is ready for regulation, or for risk, etc. It’s about applying a use case for the data and making a difference with it instead of just providing a large volume of it. Previously it was stuck on a database and expected to be sorted out by whoever was accessing it, with the onus on companies to pipe the information around a firm and create applications which can use it. Now, instead of having to wrangle it a certain way, the market is able to take that increasingly sophisticated approach of having true data as a service. Making the difference with data is all about how it’s presented and proving effectiveness with use cases.

SIX’s most recent future of finance report found that almost half of asset managers believe data velocity is the key challenge for enabling analytics to drive growth, why is this?

We believe that the trend with data is all centred around the volume, the variety and the velocity and specific to the velocity is real time data. It used to be the domain of the real time trader but actually the entire industry is moving from the back- and middle-office into the front-office. Now, the timeliness requirements are being needed all the way through the process. It’s necessary to have that data available in real time because if you see the market moving, you want to be able to recalculate your risk immediately. No one wants to have to wait for end of day anymore. 

Processes that used to be end of day or even end of month are now intra- or same day. Additionally, intra-day risk management is much more real time than it ever was and that is all across the industry. Regulators’ stance is now focused on the industry understanding their risk in real time and that has dramatically changed the way that risk managers, middle-office, back-office and asset managers have started to view data. If you have an overnight sanction ruling, then you need to be ready for trading the next morning. It’s a new status quo.

How are asset managers handling this increasing amount of data compliance requirements from regulators?

Historically, some of the activity has effectively been outsourced and been provided to them as a service by the sell-side, but that has changed as regulation on the buy-side has increased. There is now far more onus on the asset manager, for example with investor protection, as they’re required to actually process and manage their own regulations and not be dependent on the sell-side. They’re effectively having to be self-sufficient and understand both their own regulatory risk and the implications of what they’re managing down through their portfolio without handing the responsibility off to their counterpart. 

What this means is that a lot of them are starting to manage data more themselves. They’re demanding services to support that data and taking on approaches focused not just on operational, but also on regulatory and risk management aspects. Some asset managers are effectively creating this supporting infrastructure, in some cases, from scratch. They don’t have the legacy infrastructure challenges that some of the sell-side has. You can see that with the rise in roles like chief data officer much more at asset managers now.

A Coalition Greenwich/SIX report in August 2023 found that 80% of buy-side firms expected market data spending to go up across the board, how is this playing out? 

That has certainly not abated and while I don’t think we will see a kind of overnight change, a trend is emerging. It’s linked to the previous point where, the more that you do yourself, the more that you have to have the ingredients available – the sources of information. However, it’s also about what’s driving that. The rise in passive investing is one example, driving a massive increase in ETFs. As ETF issuers operate with tight margins, technology is going to play a key role in helping firms to drive changes in their business models. And technology consumes data. SIX acquired Ultumus, ETF data and platform provider, to address just these challenges. 

Another facet again is regulation. Every time you have a regulation, that text then has to be turned into something that you could report on, file, demonstrate and you need to have independent and trusted data to do that.

Also, technology is incredibly data hungry, so every time you hear the word automation or digitisation or data science or AI, that’s all about data being needed to drive it. You can’t just feed in any old data in order to answer a demand at the other end, it’s all about trusted data being the fuel of those technologies that enable firms to make quicker, smarter, better decisions. It’s because of all of these interlinked requirements that more and more firms are investing in data – many times it means that they want to buy the cakes, they don’t want the ingredients so much. This is data as a service. 

Why has the market been seeing an increased focus on fixed income data across the market? 

Fixed income is driven largely by the inflationary and interest rate environment. So, when interest rates were low, fixed income was less attractive of course, but with inflation and interest rates that has really kickstarted an increased demand for fixed income. We recently closed the acquisition of FactEntry – a data supplier for fixed income – to really bolster our data coverage.

Moves like this are again linked to making it easier for customers who want to be able to access things their preferred way as a service. They want to be able to determine when they consume it and how they consume it and we’re getting much better as an industry about tapping into those needs and use cases.

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