How are calls for transparency driving changes in firms' data management?
Tabb: Regulations from Dodd-Frank to MiFID all center around transparency. People need to understand what products they trade in and how these products are valued much [closer to real time] than before. It's a data management issue. It's about aggregating terms and conditions, aggregating positions, analyzing what they're worth, trying to do analytics on them and trying to figure out what their sensitivity is if interest rates or market conditions change, and then trying to understand how all this fits together with your financial condition. All these rules are intrinsically intertwined with data management and data clarity.
[Banks Still Struggle with Data Management]
What are the new ways that firms are looking to use their data for risk and analytics?
Tabb: We're starting to see firms look at agent-based modeling and how to stress test a portfolio a bit more accurately. That said, a lot of this stuff is pretty theoretical. … But folks are looking at new ways of looking at data to create alpha. They are really focused on speed. And especially in the equities market, we've maxed out speed as a factor, especially with volatility and volumes. And [people] are looking at higher-grade analytics to really try to find patterns in the data that aren't necessarily as transparent. They're also starting to look at analyzing unstructured data, and you need all sorts of different tools to be able to take that analysis to the next level.
How are firms managing these changes to their data management processes?
Tabb: We're starting to see new ways of doing macro data management, especially when you look at LEI and how [people] are handling counterparty numbering and analysis. There's a lot of investment going into data management. The problem is that budgets aren't really cooperating. To a certain extent they're trying to rob Peter to pay Paul. They're shutting down other initiatives and focusing on infrastructure and data infrastructure. Years ago, we saw firms invest in these multimillion-dollar reference data infrastructures. We don't see firms doing that as much.