The TRADE predictions series 2022: data

As an inescapable industry buzzword, data is by no means a new topic in the markets, but these participants see this trend continuing to ramp up and evolve in the year to come.

By Editors

This year has been a tale of two markets – initially governed by high levels of volatility caused by COVID-19, that uncertainty then became an eerie calm, with the second half characterised by constricted risk appetites and equally constricted spreads. I’m expecting a return to “normal” levels of activity in 2022, where more mixed views on credit will help to create deeper all-to-all liquidity and spreads will get closer to historic norms. What’s exciting is that the difficult market conditions of 2020/2021 have incubated a quiet revolution.

More and more firms have armed themselves with sophisticated, data-driven investment and execution tools to generate returns. They are seeking out smarter, more sophisticated ways to trade, thereby accelerating a new wave of innovation as they look to manage execution costs and generate more alpha. Until now, big data, machine learning and automation were limited to use by very large firms and within relatively simple workflows. But the revolution has happened – we’ve reached an inflection point where these three concepts impact every part of the investment and trading cycle. Decisions around portfolio construction, security selection, sourcing liquidity, which protocol to use and at what price are all beginning to be supported by predictive analytics built on these foundations. We always say “the best data wins” and I expect 2022 to be the year that proves it.  

– Gareth Coltman, global head of trading automation at MarketAxess

Access to data is getting easier, but access to alpha-generating insight will remain a priority for market participants in 2022. As the volume and types of data available to market participants continues to grow, so do the challenges of analysing huge, complex and highly interconnected data sets.  Over the last 12 months, we have seen increasing demand for Level 3 equities data and analytics tools from capital markets participants looking to generate alpha more predictably and gain an edge. 

It’s not only in equities where traders will be seeking an edge. We’ve seen great demand for our Level 3 data sets across futures asset classes, including equity futures, fixed income, short-term interest rates, commodities, cryptocurrencies and even FX. To use them effectively requires scalable compute capability and harmonisation – allowing quants to spend less time gathering, organising and cleaning data, and more time deriving predictive insights. When you understand the predictive power of Level 3 data, you understand the future was created yesterday!

– Paul Humphrey, CEO, BMLL Technologies

Digitisation is starting to affect even the world of market data distribution. 2022 will present numerous opportunities for all participants in the data supply chain to contribute to much needed transparency and automation improvements. This is long overdue, given that while the eminence of data goes undisputed, in reality the complexity of global markets has outgrown the methods designed to support market data administration.

Business processes that have traditionally depended on human interpretation will potentially be automated, if all industry participants look for the big picture. This automation of market data can help drive efficiencies in financial markets, reduce costs and administrative burdens and, ultimately, allow all participants in the data supply chain to focus more on high-value activities.

– Mark Bird, founding partner, DataBP

We see demand for high-frequency data continuing to rise in 2022 amongst economists and analysts, as the ongoing COVID-19 pandemic continues to make more traditional, periodic measures of macroeconomic activity insufficient in understanding global markets.  In addition, we believe that the immediacy with which information is updated and analysed, and the potential for ongoing travel restrictions, mean that collaboration tools, such as our recently launched Macrobond Viewer, will be more important in helping teams stay in touch and work efficiently with the latest information.  The transition to remote or hybrid working and analysing high-frequency data points has now happened, and even as we hope for a world without COVID-19, we feel that returning to using only traditional measures of macroeconomic activity such as GDP figures and quarterly employment numbers is unlikely. The future of macroeconomic measurement and prediction is more and better high-frequency data.

– Howard Rees, chief commercial officer, Macrobond

The next year will continue to see an explosion in the types of data available to the market. Traders, quants, regulators and researchers have access to an ever-growing choice of complex data and analytics but are faced with the real challenge of how to use them effectively to drive performance. Flexibility will be crucial for users to get the data they need, the way they want it. Some will want data delivered via full platform solutions and others to pull data only as necessary through APIs. Some will want simple raw data, and others complete sets of analytics.  Continued development of cloud capabilities and greater acceptance of open architectures will drive more collaboration – and help the buy-side and sell-side take full advantage of the expanded possibilities over the coming year.

– Arthur Tricoire, general manager, commercial, Iress API data and trading solutions

We believe data and the implementation of a consolidated tape (CT) for equities and bonds will be one of the main focus globally in 2022. The European Commission (EC) recently released a proposal for a CT and officially recommended FIX’s Market Model Typology (MMT) to be mandated as a standard. Having access to effective, reliable and contextualised data has never been a more critical factor and establishing a CT will remain an ongoing and massive effort. Industry participants should be a part of the conversation to ensure its success, and we invite them to get involved in FIX’s working groups to help us create good effective data and bring to life a CT in equities and bonds.

– Matt Coupe, co-chair EMEA regional committee at the FIX Trading Community

Consolidated tape (CT) reforms will finally take shape in 2022 with the UK and EU adopting legislation for the provision of a tape and the mitigation of market data access and contribution issues. The role of a CT will morph from responsibilities to consolidate data, to a facilitator of the data contributions which will be mandated and in need of operational management. Consolidation itself will be conducted by the industry through existing infrastructure. Cloud technology will feature heavily in the consolidated tape. In the US, the plan to enable competing consolidators will likely be postponed further but the governance reforms will be adopted as a means of addressing inherent conflicts and independent representation and voting for tape users and end investor advocates.

– Mark Schaedel, strategy advisor, DataBP