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Smart Data To Redefine Trading

More than half of capital markets professionals expect to spend more time analyzing client and market data as spending on data management technology is also estimated to increase.

The majority, 57%, of capital markets professionals said they expect to spend more time analyzing data according to a new survey by consultancy Greenwich Associates. The study, sponsored by data provider Refinitiv, also said 85% of banks, investors and capital markets service providers plan to increase their spending on data management technology in the next three to five years.

Kevin McPartland, head of market structure and technology research at Greenwich Associates, said in the report: “This includes everything from cloud storage environments to data lakes to real-time market data management tools. Putting in place the technology, workflows, compliance, and analytics tools needed to action data is increasingly more challenging than finding the needed data in the first place.”

In addition to market data, McPartland continued that the value of a client’s trading history is also expected to grow.

Kevin McPartland

Kevin McPartland, Greenwich Associates

“This data isn’t hard to find—every bank has it,” he added. “The expected increase in communicating digitally with customer will only increase its availability. But putting this data to work is non-trivial.”

McPartland gave examples of phone calls being run through natural language processing engines to determine sentiment and to look for key words, the storage of all electronic requests for quote – even those that the trading desk loses – and automated analysis of news stories to generate trade ideas.

Smart data

The growing importance of customer data led Matthew Hodgson to launch Mosaic Smart Data. He founded the fintech after his experience in previous roles at Deutsche Bank and Solomon Brothers, where he found it was impossible to get a consolidated view of data on all trades with one client across all products.

However MSX, Mosaic’s platform, can generate real-time analytics in fixed income, currencies and commodities from both voice and electronic trading and is being extended to foreign exchange.

Hodgson said in a presentation in London yesterday: “Big data needs to become smart data. Without real-time analytics firms will lose market share and clients.”

He added that Mosaic Smart Data will also cover equities, repos and exchange-traded funds by the end of 2020.

The firm is launching an upgraded platform, MSX360, that can analyse what has happened, why it occurred, and provide the most relevant suggestion for action.

Matthew Hodgson, Mosaic Smart Data

Hodgson said: “It is like having a quant sitting alongside each trader, 24/7, giving personalised guidance.”

MSX360 uses machine learning and natural language processing to provide narratives. For example a trader may want to know why there has been a drop in execution rates with a certain client in a specific product and the analysis may say: “Inquiries falling off because of increase in spread”

Traders can also customise their queries by setting alerts, such as when hit rates fall below a certain level with a client.

Mosaic Smart Data initially focussed on the sell side but in September the firm was licensed by LiquidityEdge, the electronic US Treasuries trading venue acquired by MarketAxess. The data suite provided will include the ability to monitor and compare liquidity, aid understanding of transaction flow and participant behaviour, and calculate transaction cost and market impact.

Greyspark research

The global financial services industry is set to spend $50bn (€45bn) on the raw, historical markets and transactions data this year according to a study by consultancy GreySpark Partners with Mosaic Smart Data.

“Tier I to Tier III investment bank spending on cash equities and FIC trade execution-linked data products and services alone grew by 5% year-on-year in 2019, and will likely continue to increase at the same rate through to the end of 2020,” said the survey.

Greyspark added that, despite this spending, firms across capital markets could increase efficiencies through more advanced analytics.

Russell Dinnage, head of GreySpark’s capital markets intelligence practice, said in a statement: “GreySpark believes that the inclusion of smart data analytics capabilities into the institution-wide data strategy equation can create new opportunities over time to not only offset the depreciation of data assets, but also to drive the uptake of cultural understanding that smart data is an investment class in and of itself.”