Cost of Getting and Managing Real-Time Market Data Key Driver for Financial Firms

New York, NY - 11 May 2009

An industry report from financial services research firm TowerGroup finds that the total cost of ownership for obtaining, managing and optimizing market data is the number one factor driving both buy- and sell-side firms to re-evaluate their current technology infrastructure. The report was compiled from in-depth conversations with market makers, hedge funds, brokers and trading systems providers, all of whom rely on data systems either managed in-house or provided by a third party.

While speed, reliability and data quality previously drove the uptake of market data management systems with financial firms throwing costly resources toward the problem, now financial firms across the capital markets spectrum are taking a sharper focus on bottom-line costs and finding that vendor-provided technologies may be as good or better than what they have built internally, according to the report authored by Tom Price, research director, securities and investments, for TowerGroup.

“Today firms are being forced by economic circumstances to evaluate even the most mission-critical applications very rigorously with respect to return on investment,” Price writes in his report, “Market Data Management: In-house vs. Outsourced Solutions.” “With monthly operations consuming four times the cost of an outsourced solution, the economic case for outsourcing has become highly compelling.”

As electronic trading continues to explode across all asset classes around the globe, firms simply cannot afford to operate without reliable, low-latency solutions. Yet the cost to build an internal direct feed infrastructure is becoming prohibitive.

“Management of market data costs in any economic climate is difficult given the ever increasing data rates and short-cycle technology refreshes required to keep up,” said Steve Listhaus, head of market data services for Wells Fargo. “We see our spend on data to feed applications as an increasingly larger piece of our overall spend and have chosen ACTIV’s services as a core component of our strategy based on their market focus, comparatively lower total cost of ownership, roadmap of innovation and track record of high quality service delivery.”

TowerGroup estimates the monthly maintenance costs of market data management for an in-house solution to be an incremental $188,000 per month, compared to outsourced solutions. According to the report, total cost of ownership is divided into two main categories: start-up costs (hardware, telecommunications, initial development, time-to-market, exchange feed connectivity, etc.) and maintenance costs (lines, extranet and hardware; staff and maintenance).

“Unlike in-house deployments, by applying our extensive research and development efforts across multiple clients, everyone benefits,” said Frank Piasecki, president and co-founder of ACTIV Financial, which provides a holistic approach for managing market data. “We have a top-tier solution to manage and distribute market data, while customers have the fast and reliable quality data they need for without the headache and cost.”

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