Securing the Shift to Managed Services: Driving Value by Minimizing Risk and Enabling Innovation

Intense competitiveness, market uncertainty and a rapidly changing regulatory climate pressure capital markets firms to perform and execute trades at faster speeds and lower cost. Recent financial and economic crises have also caused traders and investment managers to consider a wider array of information in their analysis while minimizing market data management overhead.

However, the complexity of managing market data continues to rise with increased globalization of capital markets and the concomitant growth in the number securities issued. Market data management is further complicated by new derivatives and indexes, newer data sources such as social and spatial, and tighter regulations intended to contain risk and to protect both markets and participants. Firms continue to invest in technology, but platforms strain to integrate massive data feeds from multiple vendors.

The $30 billion market data industry is adapting, as leading firms have expanded into managed services. Managed services offer financial firms ways to efficiently scale their businesses and access a broader universe of data and services. Global managed service providers (MSPs) allow organizations to leverage the latest market-leading technologies and core expertise across market data, trading and venue connectivity.

MSPs let firms reduce total cost of ownership (TCO), shifting IT budgets from capital expenditures to more predictable and manageable operating expenses. They also enable internal IT teams to be more flexible, agile and responsive. MSPs help accelerate time-to-market for new innovative products that drive growth. Firms derive more value from data, improving responsiveness to changing market and regulatory environments.

MSPs provide a secure and isolated environment to manage each customer’s resources, including tight integration with enterprise policies around individual and group access, authentication and auditing. Built-in layers of redundancy and instantaneous recovery limit down time. MSPs monitor traffic to detect and block malicious transactions and secure customer data. Best practices comply with government and industry standards.

Managed services represent a compelling value proposition for financial institutions. Capital markets firms are making significant investments in technology outsourcing to strengthen front, middle and back office functions. MSPs can move up the value stack with platform enhancements that can evolve them into alpha-generating platforms. As more regulatory bodies accept the security and compliance capabilities of MSPs, and as MSPs continue to harden these capabilities around expanded service offerings, adoption is projected to approach 50% by 2016. This represents a major shift, as some of the most significant barriers to managed service deployment have now been addressed.