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Identifying hard-to-borrow securities just became easier.
Trey Berre, global head of data services at CME Group, said the exchange group aims to become a one-stop shop for customers’ data needs as it integrates NEX and BrokerTec, partners with third party data providers, and invests in new distribution methods.
Berre was appointed to his current role overseeing the group’s portfolio of historical, real-time and derived data products and services in May this year, reporting to Bryan Durkin, president of CME Group. He had previously led CME’s derived data licensing & partner services business since January 2018.
In the past four years, the group's market data business has tripled the volume of market data it provides to clients, with data from international participation growing more than 16%, according to the exchange.
“CME made large investments in real-time data and in 2017 we rolled out Market By Order (MBO),” added Berre. “Clients can view their individual positions, the full depth of book and more granular information. Previously clients could only view the market by price.”
He explained that these investments meant that when CME traded more than 50 million contracts in May last year, its largest ever day, there were no data disruptions.
Berre’s responsibilities include development of new data products, data distribution methods and analytics, and the integration of NEX data offerings. CME completed its $5.5bn (€4.94bn) acquisition of NEX Group in November last year.
Terry Duffy, CME Group chairman and chief executive, said in a statement at the time: “Together, we will provide efficient access to futures, cash and OTC markets, as well as post-trade services and data offerings that will further support cost-effective trading and risk management."
NEX operates electronic foreign exchange and fixed income platform, and offers post-trade services for over the counter derivatives in compression, reconciliation and processing businesses.
Berre said: “There are synergies with the acquisition of NEX and BrokerTec so clients will be able to receive data on both US treasury futures and cash treasuries. The integration will allow us to launch additional products on the DataMine platform.”
Datamine is CME’s historical market data platform. He continued that CME has a project to integrate all real-time steaming data from NEX with the exchange’s market data.
“In a few years customers will be able to access cash and over the counter data alongside futures data,” Berre added.
One product from the acquisition has already launched. Berre said the EBS Quant Analytics platform for foreign exchange was launched in the second quarter through an API.
Seth Johnson, chief executive of cash markets at CME Group, said in a statement: “There's currently nothing like this in the marketplace, and that's exciting not only for us, but for the entire EBS community. The new API streaming service means that EBS clients can analyze their individual and relative performance more efficiently than ever before by consuming the data in real-time and in their own environments, ultimately helping them grow volumes and revenues.”
The new functionality streams trade information, market impact and alpha calculations on a trade-by-trade basis to clients against benchmark data taken from the EBS ecosystem.
Berre added: “There is an increased focus on developing tools that drive content to the customer that meets their standards and investment needs.”
One way of meeting client needs is to invest in cloud-based distribution rather than customers having to subscribe to the whole exchange to receive market data.
"We hope to leverage this technology to meet the changes of customer expectations,” said Berre. “It is like the music industry where customers used to have to buy whole CDs but now they can just buy the music they want, when they want.”
Berre continued that outside the core of the exchange’s proprietary data, CME has been partnering with third parties to take advantage of its global distribution and give clients a more cost effective way to access data.
For example, CME Group is making corporate bond data from Neptune Networks available to its customers in order to increase transparency. Neptune Networks is a consortium of banks that was formed in 2016 to delivers high-quality bond market data from sell-side banks to buy-side clients more efficiently and cheaply.
“Neptune has a global corporate bond composite consisting of more than 30,000 bonds which reduces the requirement for investors to calculate their own composite price,” said Berre. “The data is distributed through an API so clients do not need a terminal but can simply add a subscription.”
There is a large opportunity to improve the provision of fixed income data. Consultancy Greenwich Associates said in a report this week, Defining Fixed-Income Data, that for a single fixed income security, market participants need to look to several data providers, multiple trading platforms (which each have unique datasets) and regulatory bodies that often collect and disseminate trading and holdings information in different formats.
— Greenwich Associates (@GreenwichAssoc) July 30, 2019
Kevin McPartland, head of research for market structure and technology at Greenwich Associates, said in the report: “Even in cleared markets like swaps and futures, gaining access to historical and reference data still leaves users looking to multiple providers. While we expect this to change over time, the major trading venues largely reserve the data they collect and the analysis of that data for their client base, which pays via commission rather than directly for the data itself.”
McPartland continued that buy-side trading desks have access to more data than ever before, with each desk spending on average only $225,000 annually on direct data costs (or roughly 15–20% of their total technology budget) as large broker-dealers in fixed income are subsidizing the cost of data for their clients.
Greenwich expects this model to change as data increases in quality and becomes more valuable, requiring the buy side to pay for access.
“Conversations with top-tier hedge funds and asset managers have shown us that those on the cutting edge are in endless pursuit of new data sources, using them to further refine both their investment and execution strategies,’ added McPartland. “The buy side is certainly more informed than ever, but by all accounts, we’ve only scratched the surface with regard to the fixed income market’s transformation.”
Third party partners
Another partner for CME is QuikStrike who supply analytical tools designed for options trading. Berre said QuikStrike provides heat maps for CME’s benchmark products which shows the concentration of open interest and have been very successful.
He added: “We have a targeted approach to alternative data. In DataMine we will provide content that is complementary to our core markets and relevant to giving clients greater insights.”
For example, CME has also partnered with RS Metrics who provide satellite imagery on global copper storage while Orbital Insight supplies global and regional oil estimates.
In addition, CME has agreed a deal with the Johannesburg Stock Exchange to distribute market data from the DataMine platform to its customers, who will be able to access data from CME and JSE in one place.
“We provide DataMine as a global platform-as-a-service to content providers which creates a one stop shop for our customers,” said Berre.
Importance of data
The critical importance of data to exchanges is shown by London Stock Exchange Group’s potential £27bn ($33bn) acquisition of Refinitiv.
LSEG said in a statement that it had a strong strategic rationale for the deal as digital transformation means that financial markets infrastructure providers must operate globally across asset classes, with data management, analytics and distribution capabilities that can serve customers across asset classes and geographies.
“The Refinitiv Data Platform has over 150,000 data sources, and is a leading provider of real-time pricing, reference data, private and public company information and events, commodity, economic, quantitative and research data, Reuters News and over 10,000 other news sources,” added the UK exchange.
Steve Grob, former director of group strategy for Fidessa, said in a post on Tabb Forum that harvesting and monetizing data is becoming the primary business goal of large technology firms. “That is exactly what the LSEG, and its competitors, have become,” he added.
Grob continued that traditional exchange activities have come under severe pressure but the demand for data is an exception.
“Refinitiv has the potential to add significant scale and diversity to the LSEG’s dataset – both of which are prerequisites for effective artificial intelligence and machine learning,“ he added. “Trading margins continue to compress while the regulatory overhead is going up too. So, making the path between investors and liquidity shorter is another obvious way of creating competitive advantage.”
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