There is a direct association, being made by the industry, between advanced technologies and the impact on data and data spending, according to Robert Iati, CEO and Managing Director at Burton-Taylor International Consulting.
The company has released its Financial Market Data 2024 Kickoff Survey, which is the largest ever sample of respondents to its Annual Burton-Taylor survey.
The respondents include industry suppliers, analysts, technology providers, consultants and users to determine their estimates for market data spending in 2023.
The results show an optimistic, but somewhat tempered, outlook for the year ahead, with respondents indicating that global spend will exceed historical growth rates in 2024.
According to Iati, the greatest influencer of market data spending is advanced technology.
The pace of adoption of cloud technologies for data management and artificial intelligence for the quantitative analysis dominates “pretty much all parts of the operations – from trading to risk management”, he said.
“The tech is clearly the biggest driver of spending and data budgets,” Iati stressed.
According to the findings, only 4% of respondents said their companies are not considering AI for any part of their businesses.
Iati added that the survey has revealed that the use of AI tools and how it impacts data seems to be more of an issue for the providers of data rather than for the users of data.
Respondents predict traditional market data providers will face challenges to their business stemming from the rapid pace of change of technology and how it elevates the importance of data.
Creating data products, using raw data and making enhancements that fit the needs of their customers or financial institutions is a challenge for service providers, Iati said.
“It’s so intimidating, because now we realize that technology can do things that we never imagined,” Iati told Traders Magazine.
“Five years ago, it was a lot easier to understand how the financial institutions were going to use your data. Now it’s endless because the ability for AI to offer a level of predictive analytics that were unimaginable just a short time ago means that the providers have to think ahead,” he added.
Another key takeaway from the survey is that firms are increasingly beginning to understand that monetizing their data is a primary source of economic benefit, Iati said.
Using more integrated systems and elevating the data to be more meaningful, identifying predictive analytics correlations will ultimately enables companies to monetize their data, he said.
The survey, in its fourth year, shows that participants believe that the industry will be spending more on data year-on-year.
“It’s not a surprise that every year, we, in the industry, believe that we’re going to spend more on data than last year,” Iati said.
In addition, the spending on alternative data increases year over year, whereas the spending on equity data feeds decrease, he said.
“It is not really a surprise because we’re looking for more real time data. We’re looking for more data to meet the customers where they are, so to get necessarily move away from the desktop format,” he noted.
“I think we have so much equity market data. There’s not a whole lot of increased investment in it, because it’s not a whole lot more data available. Conversely, there’s more alternative data available, because it’s new, and it’s in some ways undefined,” he explained.
Moreover, the industry estimated that demand for ESG data/analytics slowed considerably in 2023 as forces from both internal and external sources offered inertia to the recent rapid growth.
Iati believes that in 2024, the areas of greatest growth will likely be in some of the fixed income and derivative instruments.
In 2023, fixed income had a very big year, and not only was it reflected in the trading and the trading revenues, but also in the demand for data, Iati said.
“I think that has to slow with it in part because it grew so much last year, but also because the fixed income market interest rates are now set up to do that. So I think there’ll be more interest in data on derivative securities,” he said.
“I think alternative data still is in great demand. On the other side I expect that the importance of data around ESG has peaked,” he added.
Iati also expects the overall data spending to increase in 2024: “I think the ability of technology will be the driver there.”
