Sourcing Market Data

It is no longer just about the source of market data, questions such as integration, validation, storage, consistency and distribution within an organization need to be considered. In this article we will look at some of the considerations when deciding on how to source market data and how in-built applications can reduce risk and cost while improving automation.

Which Market Data Vendor?
There are multiple market data vendors, either directly providing data or consolidating (normalizing) data from multiple sources before making it available to clients. To choose a market data vendor, an organization must firstly understand what the requirements are and this is not only based on the Treasury requirements but wider business and IT requirements:

• What data and when should it be delivered?
• IT capabilities to develop and maintain an interface or leverage inbuilt third party/core application capabilities
• Data validation and distribution

Integration

Market data vendors can provide data using multiple methods, from Excel downloads to a simple file transfer to integrated APIs to import data directly into its applications. The level of integration is driven by the market data requirements, for example, a few FX rates once a month will not justify a level of integration above importing an Excel spreadsheet or even manually entering the rates. However, most organizations require large data sets, sourced on a timely basis and validated without the need for manual intervention.

The way an organization integrates market data will, in some way, depend on the IT strategy and in-house capabilities. Some IT functions have strong in-house development teams capable of building and maintaining APIs to retrieve and import the market data, others will prefer to have the market data integration managed by a third party application. There are costs associated with both options but leveraging the inbuilt capabilities of an application that is already part of the organizations IT landscape can reduce not only the complexity of loading market data but long-term costs of maintaining the solution.

SAP and some top tier TMS applications act as a market data vendor by providing an inbuilt market data interface to access market data. SAP’s Market Rates Management module provides standard integration to both Refinitiv (formerly Thomson Reuters) as well as a more generic option for loading rates from other sources. The key benefit of SAP’s Market Rates Management is that it allows an organization to define its data requirements and import the data from a single source under a single contract while reducing the IT overhead as the module will fall under existing SAP support structures.

Validation and Distribution
Having correct and precise market data is crucial in almost every treasury process while business processes require a consistent data set across all platforms and operations. Market data validation has grown increasingly important, historically, manual, Excel-based or fully bespoke system processes have been used to validate market data, providing a very limited audit trail, introducing user errors and the potential to impact financial postings should an error not be identified. Automated data validation uses rules-based processes executed once the market data has been received that identify, remove, or flag inaccurate or anomalous information, delivering a clean dataset, ensuring the accuracy of the market data in the receiving applications/systems is correct and identical.

The distribution of validated market data to all systems and applications that require it needs to be considered when selecting a market data provider and integration solutions. There may be license implications in distributing data to multiple systems and applications which can increase the recurring costs while the options to distribute the data have the similar IT considerations as the initial integration but potentially on a larger scale, depending on how many different systems and applications require the data. As with the integration to the market data vendor, the ability to leverage 3rd party applications can reduce the costs and complexity of market data distribution.

We can support the validation and distribution process with a tool: Zanders Market Data Platform. This Zanders Inside solution, powered by Brisken, builds a bridge between the market databases and the enterprise application landscape of companies. In this way, the Market Data Platform takes away the operational risks of the market data process. The Market Data Platform runs on the SAP Cloud Platform infrastructure to ensure a secure cloud computing environment to integrate data and business processes to meet all your market data needs.

How does the Market Data Platform work?
The Market Data Platform has many functionalities. First, the platform retrieves the market data from the selected sources. Also, the platform is the source of truth for historical market data, and all activities are logged in the audit center. Subsequently calculations and market data validations are performed. Finally, the hub distributes the market data across the company’s system landscape at the right time and in the right format. The platform can directly be linked to SAP through the cloud connector, and connections to other treasury management systems are also possible, for example with IT2 or with text files. The added value of the Market Data Platform versus other solutions such as SAP Market Rates Management is the additional validation of data e.g., checking completeness and accuracy of the received data on the platform before distributing it for use.

The Zanders Market Data Platform is the solution for your market data validation processes. Would you like to learn more on this new initiative or receive a free demo of our solution? Do not hesitate to reach out to us!