April 14, 2019

When Bad Things Happen to Good Banks

 

Barry Raskin
Managing Director, Market Data

Financial firms have a lot of people looking over their shoulders these days to ensure that they are well-behaved. Post the Global Financial Crisis, government oversight has become a large part of a bank’s budget and planning. Risk and compliance functions have grown at each firm and most of these institutions strive to do the right thing.

That’s not their only challenge. Firms are heavily reliant on market data in all its forms, to perform their most critical task (i.e. making money for clients). Data is licensed from exchanges, ratings agencies, data vendors, index creators and a burgeoning set of alternative data providers as well.

Those of us that have been in the market data space for a large percentage of our careers know that for every piece of data licensed, there are a wide range of rules governing the who, how, where and when of this valuable content. However, not everyone within each firm has that understanding, background or education. Throughout every firm, there are people with access to content without the full contextual understanding of what data licensing is all about.

While banks employ systems, data governance rules and firmwide controls, life happens. Application writers, responding to real business needs, may create a service using market data, even for internal use, that somehow flies under the radar. No intentional bad behavior here, just a smidgen of ignorance of the rules.

Proprietary content providers have recently stepped up their efforts to police users to ensure that they are receiving the licensing fee they believe they are entitled to. Audits have now become a normal course of business from these sources. To properly respond to these audits, firms are expending increasing amounts of resources across several functional areas. There’s no value-add here!

One way to help mitigate the unlicensed utilization of data is through training and education. As Sy Syms used to say, “An educated consumer is our best customer!” Compliance training for anti-money laundering, cyber-security, etc., is now mandatory and commonplace across the industry, however, market data compliance training is not as pervasive. If all those who touch market data were more educated, they would be less likely to go rogue with their data use.

Jordan & Jordan has been helping firms for many years with a training program that we offer. It is easy to customize to fit the particulars of each institution. Audits have become a way of life, but with proper training, compliance will certainly be improved and will make these reviews less daunting.