Case Studies
Market Data cost savings and optimisation
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High-Level Process
- The following approach was put forward by AFO and agreed to by the Client.
- Work with existing market data structures and inventory tools within the bank to identify cost-saving and service duplication opportunities
- Analysis and presentation of findings to executive management
- Vendor savings proposal review
The client is one of the Top 5 South African Investment banks, headquartered in Johannesburg, South Africa with global operations.
Executive Summary
The bank approached AFO for assistance with achieving savings and optimisation of market data. Not just as a once off but to also plan for a longer-term preservation of savings and efficiencies through clear and effective workflow processes.
An additional driver of the effort was the bank had invited two of its largest key market data vendors to submit proposals on how they bank could possibly reduce market data spend without negatively impacting service or operations. AFO was to assist with reviewing and advising on submitted proposals.
Process breakdown
Work with existing market data structures and inventory tools within the bank to identify cost-saving and service duplication opportunities:
This was the longest part of the process, and the following activities were undertaken:
- Mandate clarity. AFO worked with the executive management to ensure the mandate and approach was clear as well as which internal resources were to be made available to AFO.
- Stakeholder Communication. A bank is a relatively large place and market data works across many functional areas and regions. A stakeholder communication process was created to keep various department and business heads informed as to the purpose and progress of the work being undertaken.
- Terminal Review. A full terminal review was undertaken across all users and vendors. A key part of this is also the clear identification of the product types within the Market Data inventory tool. We ensured that product types such as terminals, infrastructure, research product and such were consistently applied throughout the inventory tool to ensure consistency. This allowed us to review types of terminals by vendors and users as well as identify dual-terminal users.
- Application Mapping. All applications that consumed market data were mapped and reviewed to identify data compliance gaps and potential datafeed alternatives.
- Datafeed Identification. All incoming datafeed providers were identified and reviewed in terms of contract obligation and costs. Potential alternatives were reviewed against the incumbent providers as well.
- Interview with department heads and business managers. Interviews were set up and undertaken with various managers and heads to ensure they were aware of terminal usage, alternatives, and costs. As well as provide the manager with input on alternatives against cost. (i.e. does the user really need a Bloomberg?)
- Market data vendor contract review. A full review of all market data contracts and products was undertaken to ensure all contracts were in the inventory tool with the correct contract types, contract periods and notice conditions.
- Identification of duplicate or unused services. With the above undertaken, we were able to identify both duplicate as well as unused market data services across the estate.
- Review of inputs to the market data inventory platform. This included but wasn’t limited to HR and organisational structure data, group finance cross-rates for normalisation of all foreign exchange costs into South African Rands at a historically correct rates over time as well as if all invoices are being captured in the platform.
- Review of cost saving proposals submitted by both key vendors.
Analysis and presentation of findings to executive management
- Terminals
- Datafeeds
- Infrastructure
- Overall review of both key vendor savings proposals.
The analysis looked at:
1. Reduction in unnecessary spending, including:
- Cancellation of unused services
- Cancellation of duplicate services
- Alternative service opportunities
2. Review of vendor proposals, including:
- Contracts horizons
- Future costs
- Short-term savings vs Long-term operational impacts
- Planning for unexpected changes to market conditions
- Alternative vendors
- Infrastructure cost
The presentation of key findings:
- Immediate, year-to-year, savings of over ZAR 17,000,000 achieved through the elimination of unused or duplicate services.
- Further cost-avoidance measures resulting in over ZAR 9,000,000 cost avoidance through updating entitlement platforms, subscription review and vendor substitutions.
- The above equated to a year-on-year saving of over ZAR 26,000,000 – almost 10% of the annual market data budget.
- Implementation of market data best practice to preserve savings and encourage ongoing data compliance.
- Alignment of spend and procurement systems with market data inventory to ensure full market data estate is controlled. This is often overlooked and, in my opinion, a key market data command and control KPI.
- Internal process engineering resources allocated by client to assist with workflow mapping and implementation.
Vendor savings proposal review
Review of vendor proposals clearly showed that is in the best interests of the bank to seek savings and cost optimisation opportunities through effective workflow and market data control regimes than to rely too heavily on single-vendors to provide short and medium cost savings frameworks as they come with lengthy and complex contracting obligations and periods.
Material cost savings would only be realised in the long term when more and more services are pivoted away from competing vendors to the single key vendor. This leaves the client in a precarious position. Unable to contract with other vendors without sacrificing discounts and locked in for potentially longer and longer contracting periods. The cost of exiting those contracts become significant and leave the client unable to reposition quickly to accommodate changes in market data sources or technology.
In other words, an effective Market Data command and control environment managed by the client is critical to the effective management of its Market Data estate. It was proposed that the client did not seek additional discounts from market data vendors in exchange to longer contacts or additional obligations.
Executive summary
The use of a Market Data inventory tool alone was not sufficient to enable cost savings or workflow process efficiencies in an enterprise market data environment.
Proactive market data management processes and skills combined with an inventory tool are key elements in ensuring market data cost savings and workflow optimisations are achieved and preserved.
Banks and treasury operations are complex, resource constrained environments. Specialist market data consultancies like AFO can provide exceptional value in the market data management space by facilitating not only cost savings, avoidance of cost-duplication and data compliance risk mitigation but ensuring those savings and optimisations are preserved over time whilst ensuring expensive banking resources spend time undertaking complex, knowledge work and projects instead of churning time on repetitive and error-prone tasks.
Case Study: Market Data cost savings and optimisation.
The Client The client is one of the Top...