LSEG’s perspective on decentralized finance, data catalogs and managed data services
A number of London Stock Exchange Group (LSEG‘s) senior business leaders spoke at the annual Global Financial Reporting Conference (WFIC), held recently in Prague. Stefan Reichenbach, John Mason, Janelle Veasey, Stuart Brown and Jason West, and others, participated in extensive discussions, the common theme of which was data and its various opportunities and challenges in capital markets.
Topics WFIC ranged from decentralized finance (DeFi); the pervasive problem of increasing data volumes and what they practically mean for capital markets firms, the financial reporting industry and what companies expect from data providers in the post-pandemic dispensation of Covid-19. WatersTechnology caught up with LSEG quintet approaching WFIC to get a glimpse of the discussions they were expecting.
DeFi the disruptor
Much has been discussed in recent months about the latest darling of the fintech industry – DeFi. Essentially, DeFi is an alternative, decentralized framework governing how business in the capital markets is transacted using a form of distributed ledger technology (DLT)—specifically blockchain. The DeFi movement is still in its infancy, but initial indications and use cases seem to have found a happy home for the technology in the form of a rapidly evolving crypto market.
“We are in the early stages of the technological transition [from the incumbent framework to a new paradigm]says Stefan Reichenbach, Global Head of Pricing and Commercial Strategy at LSEGfrom Refinitiv. “Much of the DeFi space is relatively immature and there is still a lot of work to do before it scales. That said, DeFi is about DLT and the big difference with the existing financial services industry is that the technology operates on a distinct paradigm. While today’s financial infrastructure runs on reconciliation of centralized databases, as you move [to the DeFi framework] you have a shared ledger that is distributed and decentralized. This allows you to do all sorts of things, especially the creation of smart contracts, which drive the DeFi opportunity.
According to Reichenbach, there are both short-term and long-term DeFi opportunities to LSEGthe point of view of. The immediate opportunities, he says, relate to the company’s current core business: real-time and benchmark pricing of cryptocurrencies in particular; enterprise risk intelligence services (the Refinitiv World-Check database), which a number of crypto-focused entities use to meet their anti-money laundering obligations and knowledge of your customer; expanding the company’s existing index business to include digital asset indexes; and business connectivity through its recently acquired subsidiary Tora. Tora provides trading technology and connectivity services to a number of digital exchanges. When it comes to longer-term opportunities, Reichenbach is understandably less certain, given the speed at which the industry continues to evolve.
“Right now, when you look at the information available on DLT, everything is related to cryptocurrency,” he explains. “For the full potential of DLT to be mined, we need to get to a position where reliable off-chain data is made available on-chain, and I think that’s a great opportunity for information providers like LSEG. We have looked at this space, but it is still quite immature,” he says.
Data catalogs to the rescue
The ongoing challenge of too much information was a pervasive theme that permeated the roundtables in one form or another during this year. WFIC. It’s a challenge that even the most sophisticated capital markets firms with the healthiest budgets and the most experienced technology and data teams face on a daily basis due to the sheer volumes of data they produce and consume. Storing, displaying and sharing information within the company is not an easy task. Neither is the sensitive issue of data licensing agreements, particularly regarding who is allowed to use the data that is in a company’s data repository and how they are allowed to use them.
Data catalogs can present the industry with a solution to significantly address all of these challenges at once, much the same way Spotify does in the music industry.
John Mason, Platform Group Leader at LSEGexplains: “I think they are [a solution to the problem]and they will become a fundamental part of the data industry because as we move towards digital content people will want to understand exactly what their rights are to access their data because licensing agreements can be quite complicated – they could involve various legal entities or be jurisdictional.
“In the past, people were looking to consume data and understand if they had the right to use it in a certain jurisdiction or team, but what we’re seeing more and more are people looking to understand if their customers can use their data. Organizations are increasingly looking to complement their capabilities and services with additional value-added services to differentiate their platforms in the marketplace.
As much as financial markets firms have morphed into entities resembling technology and data organizations in recent years, so their fundamental objectives of making fast, accurate and transparent business, operational and investment decisions, either at the name of the company itself, or in the name of its investors/customers—remain the same.
“Customers don’t want to move data anymore. They are increasingly looking to interact with data in the cloud rather than ingesting, storing and distributing it internally,” Mason says, adding that the primary driver of the shift to cloud-based data services due to increased market volatility due to Brexit uncertainty, the Covid-19 pandemic (and subsequent unprecedented market volatility towards the end of the first quarter of 2020) and, more recently, geopolitical unrest in Eastern Europe. “When there is volatility, people start looking for data to ask and answer questions, which means data volumes increase,” he says. “Companies are also looking for a simplification of the architecture and the interlocutors, and this is mainly a cost factor: they are increasingly looking to reduce the cost of using data, which means simplifying their architecture, for example working with a single Application Programming Interface [to access all of their data].”
A light touch
Finally, there was a joint discussion with Janelle Veasey, real-time group leader at LSEGand Stuart Brown, Group Leader of Enterprise Data Solutions at LSEGwhich focused on the challenges LSEGthe customers of and how, as an organization and data provider, LSEG meet these challenges. Needless to say, capital markets firms on both sides of the industry are looking to reduce the cumbersome tasks associated with sourcing, collecting and managing data wherever possible so that they can concentrate on their main tasks with the highest added value. This is an area where, according to Veasey, LSEG has been focused for a while now, which she describes as a “light touch” of LSEGcustomer perspectives.
“An example of this is our real-time managed delivery service,” she says. “We had huge customer demand to move this service from a private cloud to a public cloud, so we launched an accelerated program during the year to get it up and running. We had one of the fastest early adoptions of the service we’ve ever experienced.
A second area in which LSEG seeks to ease the load on its customers around its tick data business with over 30 years of historical data, which when combined with individual packet data through its MayStreet business (acquired in May 2022), are particularly costly and onerous to manage internally for all capital markets firms, regardless of size. “It comes down to customers wanting to pay for what they consume and consume what they pay for, and having some transparency about that,” says Veasey.
Customers want choice
There is no doubt that there has been a significant increase in demand for managed data services from capital markets firms at all levels, many of whom have used the onset of the pandemic to take stock and reassess their daily activities. and operating models. It is a domain LSEG has been active for over a decade through its Refinitiv business. “We’ve been providing managed services for over 12 years,” says Brown. “This concept of managed services is not new to us. When customers started asking for more of what we could offer, we were able to respond very quickly. »
According to Brown, customers are ultimately looking for one thing: choice. LSEG is well placed to meet this need, whatever the specific business requirements. “We offer them choice across the latency spectrum, especially now after the acquisition of MayStreet, which allows us to offer ultra-low latency, low latency, real-time, blended, intraday and historical data. “, he explains. “We also give customers the choice of how they want to consume this data: on-premises or in a private or public cloud. It’s the service we provide to our customers, which ticks a lot of boxes, it’s the trend.