About Us | Search | FAQ | Contact Us
Market Data Management, Global Cost containment, and what it takes to achieve it.
It does not take a genius to work out how much your organisation spent globally on the provision of Market Data information services to its traders last year. All you need to do is gather the vendor's invoices together and do the maths. What surprises most people when they first do this, is the magnitude of the amount spent, and how close to the top of the list of the organisations overall expenditure items it is.
"Global management reporting" and "cost containment" are the words on everyone's lips these days, but how can it be achieved? In this article I will explore some of the issues to be considered and outline some of the approaches to cost containment that do work.
As you would imagine most of this is common sense, along with a good understanding of what you've bought, and of course the help of an excellent Market Data Management system (like MDS2000) to assist with the analysis and modelling your data. Armed with these few tools you can reorganise your users, vendors, market data contracts and services agreements and end up with substantial savings.
Gathering the ingredients
Must Have #1:
With the best will in the world, you are not going to succeed with cost containment if you cannot prevent wildcat purchasing.
Must Have #2:
Understanding Global service
pricing (Don't buy anything until you really understand how much it costs.)
Once you have this knowledge you can make informed decisions rather than knee-jerk reactions. For example, if you know that the service is billed under a "site fee" arrangement, you will realise that cancelling 50 of your 200 permissions to that service is not actually going to have any effect on your bill.
This becomes clear when you appreciate that services are typically billed in one of three ways, as follows:
Per Access Fee
To add to the complication,
there are many services that employ a "hybrid" charging system that
contains a combination of the basic methods above.
Who bills you for the market data and at what frequency, can also change dramatically depending on where you are. An exchange service in Europe, charged in a local currency, might be billed by the vendor who "carries" it to your site. In the USA that same service may be billed by the "source" vendor and in a different currency. In Japan (for mostly historical reasons now) the bill may have to come from a native Japanese company acting as a broker for the source vendor or the carrier.
In the USA some services may only attract state tax, where others may attract state and city tax etc.
Be aware of "Netting"
Take a pro-active approach
Knowing that certain thresholds have been reached is also a must. For many services the price you pay changes dramatically when you exceed or fall below certain numbers of users. This affect can often creep up on you over time, so it is important for your MDM system to be able to watch out for this and advise you automatically. You may want to configure your MDM system to inform particular groups of managers, via e-mail for example, when these thresholds are broken.
Duplication of service delivery warnings should also be an automatic feature of your MDM system if you want to minimise costs. Unless you have negotiated netting rules (see above), your traders are liable to pay for each access the same service regardless of how it is delivered. Remember, your liability is based on entitlement NOT usage.
Use Trader Profiles
Centralise control but
distribute the management.
Reporting needs to be easily accessible both locally and globally, allowing the costs of an individual, a department or the whole company to be produced in customisable formats. Ideally reporting should be made available to everyone who needs it via your intranet. This way there is no excuse for people not knowing how much they cost.
External procedures, covering the rules of engagement with vendors, also need to be set up. Involve the vendor's sales force and then carefully police them. Make clear to the vendors that they must have received an official order reference from you, and that this reference can only be issued certain authorised people within your organisation (not the trader who wants the service), if they expect to be paid.
n A good understanding of the peculiarities of the service costs.
n A method of profiling your users to highlight exceptions
n A pro-active MDM system (like MDS2000) to document it all and provide alarms and warnings where necessary.
n The power to enforce procedures both internally and externally.
|Home | About Us | Search | FAQ | Contact Us|