Exchanges and Data: Maximising Value

With Eva Saidac, Product Management, NASDAQ OMX

How are big data management and data trends affecting exchanges?
We see that the perception of data is substantially changing across all industries at a very rapid pace. There has been an exponential growth of data in the last few years with the proportion of unstructured data growing the most. That’s why firms really want to tap into those wider sources of data; it could be news, it could be video, it could be social media. Simply put it could be all different types of data that you can’t easily structure into a database. But they’re very interesting and valuable.
For exchanges specifically, they have been dealing with high data volumes and high data update frequencies for a very long time. That’s part of the core business of an exchange; even if it is not a particularly large exchange, the volume of data builds up very quickly. Add along all historical data on top of that, and you get huge volumes as well as new complexities with the growth of low latency data.
The exchange industry is naturally managing and making new headway with structured data, but unstructured data can be very interesting from a strategic business perspective. However, technology challenges remain. Investments are needed in order to capture and manage all relevant data, including unstructured data, and that obviously needs to be supported by relevant business cases. The truly interesting thing is when you put all the data, regardless of structure or source, real-time or historical, in the same context, you can start to discover things that you previously couldn’t before. From an internal perspective, business insight and intelligence will support decision making, but it can also be an effective tool to provide superior client support as well as a means to provide value-added offerings. It is a great opportunity for an exchange to utilise all the data that they already have in the best possible way, but also to tap into new opportunities so they can serve their client base with new data related offerings.
Increased focus on data driven by exchanges, regulation and client demand
Obviously one can’t directly compare markets like the US, Europe or Asia etc. too specifically, but factors driving capital markets’ increased data focus include regulation which demands large data to increasingly be made available at any given time. Market participants need to find appropriate solutions and providers to assist with these obligations and exchanges could be the optimal supplier for such services.
Exchanges want to leverage their assets, provide better services and, which is always going to be the best driver; stemming the possibility to create and provide new client services that can create revenue streams on their own. Exchanges could further leverage the fact that they are the main source of much data – including the data sets from listed companies, the instruments’ reference data and corporate actions, as well as the vast amount of market data itself. I think that data receivers value the opportunity to obtain the most critical set of information directly from the source and this can be used by the exchanges to broaden their data related offerings.
Capital market firms overall have to manage the data that stems from their regulatory obligations; buy-side use more data and data elements in their research and investment strategies; and sell-side supplement their trading strategies with more data sets as well as use data to simulate and test them. An additional example is commodity trading which is highly dependent on data derived from sources of non-exchange generated data, with a large portion being unstructured, such as production and consumption projections, weather forecasts, news etc. These are examples of needs that exchanges can find new ways to serve.
How are exchanges utilising structured versus unstructured data?
The focus has traditionally been, and is of course still very much, on structured data in the exchange industry and there are new opportunities in that space alone. One area driving the evolving use of unstructured data we see is the market surveillance function. For instance, in the event of a market alert, the possibility to research the event further by accessing and searching data that was not easily detectable before such as news, emails and social media etc. to further discover connections between the data. This could be highly relevant when automatically scanning for suspicious trading patterns.
To summarise what do you think will happen next within the data space for exchanges?
The big data wave is on its way and the exchange industry is no exception with a clear strategic demand for many different aspects of data. I think if an exchange doesn’t fully leverage the opportunity, someone else will step in and do it. In general exchanges want to provide more services, and I think the reason data is such an important topic right now is the depth and breadth of its potential.
Everything within an exchange is about data, it’s a core fundamental for the marketplace, and it is now a new great opportunity to maximise its value further.