The massive amount of market data available in the current day is both a boon and a burden. More information can lead to making smarter decisions, but does the glut of data lead somewhat to paralysis by analysis?
That was one of the main themes at the International Trader Forum (ITF) conference we attended in September in Madrid, and also specifically the panel that featured our CEO, Joe Wald, titled “Data, Data Everywhere, But Does it Lead to Better Execution?”
The panel was largely guided by two key questions from the audience: What should the sell-side be doing to clean and normalize data? And, how much would a consolidated tape help the European market in execution analysis?
Both questions are very pertinent to our industry right now. The panel featured both buy-side and sell-side folks acknowledging the importance of analytics tools and using robust technology to clean and normalize data. Analytics solutions are an increasingly critical component of the trading process and an important tool that people are using to achieve best execution.
Everyone was in agreement that, with respect to venue analytics, the very biggest firms and asset managers are leveraging robust analytics technology and doing so effectively. It’s true that this usually requires a tremendous amount of resources and expertise to deploy and utilize this technology effectively. But the “democratization” of technology in general – including analytics solutions – in the past few years means that simple-to-understand and cost-effective analytics solutions are available to smaller firms as well. You don’t have to be a top-100 firm to take advantage of this technology.
In fact, our advice to firms of all sizes is that you need to be doing something in this area. You may not have the tech resources or budget of a large, global institution, but you can start small in a meaningful area, such as venue analytics. Focus on what you can do right now rather than what you can’t.
Regarding the other big theme, the general consensus is that European market data is much more unstructured than in the U.S. That’s a main reason why EU market authorities like The European Securities and Markets Authority (ESMA) are considering using their power to compel market participants to produce a consolidated tape; however, many people we spoke to at the conference are skeptical that entities like ESMA will use this power effectively.
Right now, ESMA is in the midst of a public consultation on the development in prices for pre- and post-trade data and on the post-trade consolidated tape for equity instruments. ESMA intends to submit a final report on this topic to the European Commission by December. We will be closely following how EU market participants resolve the current conundrum of not having a consolidated tape in Europe.
Overall, the conference participants that we had the chance to chat with during our time in Madrid really seemed to care about execution and were more frustrated by the limitations in the quality of the metrics imposed. We were encouraged by the focus on and enthusiasm for using analytics to inform best execution and make smarter decisions, and overall eye towards using data more efficiently and effectively.