Regulation is Driving the Industry Towards a Utility Approach to Market Data Infrastructure, Says HSBC's Dean

Regulatory change is pushing the industry towards a central utility model for market and real-time data, according to Alan Dean, global head of cross asset FIX connectivity at HSBC Global Banking and Markets. Speaking at A-Team Group’s Business & Technology of Low-Latency Trading (BTLLT) event in London this week, Dean indicated that the onslaught of regulation is squeezing firms’ budgets and the logical extension of a cost saving approach would be to opt for a utility infrastructure via a consolidated European data centre.

Dean’s idea is that regional hubs could be developed for market data, around which co-location offerings could be wrapped. “In this way, operational costs could be removed from the process by a reduction in duplication,” he explained. A European, North American and Asian hub, for example, could be operated by an industry developed and run utility in each region. The development of Markit as an industry led utility was used by Dean as an example of a success story that could be replicated in this real-time market data space.

Last month, HSBC processed, on average, 65 million messages per day, according to Dean, and he reckons the costs of this could be brought down significantly via a utility approach. “The traditional approach was to keep everything in-house and under the control of individual firms, but this is no longer a competitive differentiator,” he contended. “Clever technology could be deployed to be able to access this data on a pay as you go basis and keep operating costs down.”

Dean noted that this move might require the intervention of regulators, but the industry should be at the helm of any development. “In any case, we should be making sure that we are feeding back impact assessments for incoming regulation to regulators,” he said. “We have an opportunity to influence change and we must take it.”

HSBC has already developed a platform approach across its asset classes to market data, said Dean, putting his theory into a smaller scale context. Benjamin Stephens, electronic trading and quantitative prime brokerage origination at Nomura International, indicated that his own firm is also looking to rationalise its own internal technology capabilities (see more here).

BTLLT will be taking place again next week on 28 April in New York – check out the details here.