Financial firms are spending big bucks on obtaining reference data to run their operations. But they are generally unhappy about the quality of the data they are ending up with. And most are clueless about how their companies manage the data used by the many applications they use.
Those are two of the key findings of a survey of 52 U.S. fund managers, broker-dealers and custodian banks conducted by Patni Computer Systems, a business process and IT outsourcing firm. A copy of the survey was obtained by Securities Industry News on Wednesday.
Of the 52 firms, 28 were asset managers, two were custodian banks and six were brokerage firms. Sixteen firms classified themselves as “other” without specifying what that meant. The respondents included data managers, senior management and operations executives.
The survey showed that only 8 percent of asset managers said they were fully satisfied with the quality of their customer data. That means just two firms – while none were fully satisfied with their product, accounts, market data and pricing data. None of the broker dealers or custodian banks were fully satisfied with any of their data.
About thirty eight percent of the respondents said they spent more than $4 million a year in obtaining data while fourteen percent said they spent between $1 million and $4 million. And 38 percent of the respondents don’t even know how much their companies are spending.
When it came to the maturity of their data governance needs, only three percent said they were very satisfied while 36 percent said they were somewhat satisfied. Patni defined data governance as the process by which a firm formalizes the management of its data. That means who it puts in charge of ensuring the data is accurate, updated and distributed to all the required end applications and users.
Incorrect data can lead to failures to settle securities transactions on time, as well as increased market, credit, counterparty and operational risks, say data experts. And that spells millions of dollars worth of operating expense.
Regulators on both sides of the Atlantic have called for the financial services industry to create either regional or global data repositories to allow firms to maintain accurate information about the securities they trade in and the transactions they complete. Doing so, allows securities watchdogs to have a better understanding of systemic risk – the potential that a single financial firm could go under jeopardizing the financial health of others.
Patni conducted the survey last November and December to determine market interest in a new managed data management service. The service, launched last week, allows firms to outsource all of the work involved with reconciling discrepancies between reference and market data from multiple vendors electronically and with a team of Patni’s data analysts.
This article can also be found at SecuritiesIndustry.com.
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