Market Data Compliance & Cost Quick Check

Increase of risks for penalties and additional license costs due to non-compliant market data usage

In recent years owners of market data and special services like exchanges, brokers, rating agencies, etc. and market data providers like Thomson Reuters, Bloomberg and others, reshaped their commercial models and tightened their terms of use for market data consumption in applications, either to protect or to push their revenues. At the same time they increased their audit activities to ensure that financial institutions use their data in applications compliant to their contractual rules and in order to realize fines and additional licenses.

Many financial institutions do not have a clear and present overview of market data usage in their applications, and even less of an exhaustive market data entitlement on user level. Hence the risk of penalties and relicensing due to non-compliant market data usage is substantial. Furthermore it can be expected that unnecessary incurred costs due to inadequate data usage which is not adapted to the actual needs of the business consist. Financial risks can sum up to a double-digit millions euro in larger institutions. Due to current cost pressure it seems to be negligent for management not actively counter these risks with corrective measures.

Current challenges for financial institutions – to avoid costs, to reduce costs

The current situation in lots of financial institutions regarding compliant market data usage and effective cost control within IT applications is characterized by the following challenges:

• Missing market data entitlement in applications on user level lead to documentation gaps in audits and may ultimately label the whole user base to be fee-liable
• Historically grown system landscapes camouflage the market data redistribution within financial institutions as well as across legal entity boundaries
• Often missing sensitivity of application users to applicable terms of use and awareness of the consequences and costs of non-compliant usage of market data

Due to these challenges it needs quite some time to get risks and costs under control in a sustainable way. A first estimation of risks and cost savings potentials is needed initially.

The Be GmbH Market Data Compliance & Cost Quick Check – a first step towards compliant and appropriated market data usage

The Be GmbH Services

The Market Data Compliance and Cost Quick Check provides a brief overview of potential risks, which can emerge from violations of contracts with exchanges and vendors as well as a brief overview of first cost savings potentials, based on manageable effort.

• Support in the identification of relevant systems and market data for the Quick Check scope using a checklist
• Realisation of short interviews with application owners by using a proven criteria list and identification of potential non-compliant market data usage as well as optimization potentials
• High-level check / sampling of relevant contracts
• Risk evaluation of systems in scope and indication of the prevailing financial risk due to non-compliant
  market data usage as well as identification of cost savings potentials for inadequate not demand-oriented usage of market data in applications
• Recommendations for Quick-Wins and for mid and long term measures to ensure compliant market data usage
• Classification of the systems by means of different criteria in a standardized scale and visualization of the risk of market data compliance breaches as well as optimization possibilities

One exemplary result of the Be GmbH Market Data Compliance and Cost Quick Checks – Visualization of possible risk sources and cost savings potentials