07.05.2019
By Rob Daly

Data, Analytics Lead Fintech Investments

Wall Street is doubling down on its fintech spending to support data analytics as well as market data and alternative data, according to the authors of a soon-to-be-published study by industry research firm Opimas.

The capital markets have increased their investments 16% year-over-year and 12% year-over-year for each category respectively, Octavio Marenzi, co-founder and CEO of research firm Opimas, told Markets Media.

“It is difficult sometimes to draw a hard line between the two since frequently the actual analysis runs on top of the data,” he added.
Much of the investments are going for new infrastructure that firms layer upon their existing data infrastructures rather than ripping and replacing legacy systems.

Collecting, normalizing, and delivering data to the appropriate person at the right time within the organization has become more complicated due to the influx of alternative data.

“The technology increasingly has to handle new data sources and create databases connecting the entities and different systems,” said Marenzi. “It’s creating a data management platform.”

Through its interview with more than 120 companies, which included investment banks, exchanges, asset managers, wealth managers, custodian banks, and fintech vendors, Opimas found firms investing a fair amount on databases and system linkages that can handle multiple different data feeds with different data structures.

“Something like a Reuters infrastructure is very good at handling traditional market data feeds and things of that sort but maybe not so good and handling some of the newer and esoteric data feeds,” he added. “The whole area of alternative data becomes more complicated and difficult to handle.”

Not only are the technology teams working to extract signals from scraped websites, legal and compliance departments also are working to make sure that their firms are not violating user agreements, contracts, or fiduciary responsibilities to keep the data confidential in the process.

“There have not been any court cases around this yet, but hedge funds are concerned that people will go after them in the future and say that the hedge funds violated an agreement, so that is insider trading,” said Marenzi. “No one wants to be the first settled case law, so they are very cautious there.”

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