A case study describing this market data feed replacement project in full detail is available for download here.
Increasing regulatory pressures make that the pricing and valuation of financial instruments (‘Pricing & Valuation’) and the related risk management are becoming increasingly complex processes within financial organisations. External reporting due to (e.g.) Basel III, Solvency II or MiFID and managing associated risks once more show the importance of automated data feeds and processes using high quality market- and reference data. This in contradiction to the trend of reducing cost that each organisation is trying to accomplish.
Because of these developments, our client (a Global Investment Bank) is considering whether the processes of front to back around market- and reference data consumption by application Y could be carried out more efficiently and effectively. The aim of this is to strengthen the grip on the current market risks and to improve the quality of reporting.
In making a choice for the possible transition to a new automated data feed solution for application Y, the following principles (Critical Success Factors – CSFs) play a decisive role:
- Clarity – Does the switch to a new data feed solution (FTP and/or real-time) result in the unambiguous use of market data within the complete organisation (Application & Product Management, Back office, Front office, etc.)?
- Quality – Does the switch to a new data feed solution improve the quality of market- and reference data
- Simplification – Will the switch to a new data feed solution simplify existing infrastructure, while maintaining a stable and reliable solution?
- Efficiency – Will the implementation of a new data feed result into a more efficient workflow, from front to back? Including external reporting?
- Compliance – Does the new structure of the data feed setting constitute a compliant use of market- and reference data?
- Cost – Does the move to a new data provider result into cost savings?
Situation & Scenarios
The current processes within the Bank run mainly on the infrastructure of Thomson Reuters (RMDS). Historically, many financial institutions have had such an infrastructure; it allows applications and terminals to be equipped with real-time market data. Until a number of years ago most market data suppliers, apart from Thomson Reuters, were not able to provide such a robust real-time market data solution. Nowadays, however, most vendors have caught up in this space.
In addition, in recent years the Bank has been using fewer Thomson Reuters products and services, particularly within Front office. The products which are still in use are thus supported by a relatively expensive infrastructure of Thomson Reuters.
Screen analysed the Bank’s current situation and identified different (cost) optimisation scenarios.
Conclusion & Recommendations
The switch to a new data feed solution for Application Y will give the Bank some significant benefits:
- Uniform use of data front to back data as regards the valuation of instruments
- Compliant use of market data, also because the use of real-time data will be reduced
- Cost for the use of the (remaining) real-time data will be drastically reduced
- More efficient processes within the organisation, increasing market risk management
With these benefits taken into consideration, the investment associated with this project will clearly result into cost optimisation for the Bank; both in the short as well as in the long term.