Big Data Brings
Transparency, one of Wall Street’s Biggest Fears
(Part 1 of 2)
So last week we were a bit critical of Big Data, today we
are going to share one of the many reasons why we love it. Big Data is shaking up many industries and
perhaps banking more than most! When referring
to the 99% regarding the Occupy Wall Street movement we personally think about
failed banking oversight, government bailout packages, recession catalysts and
excessive banking compensation. Clearly
there is room for improvement in banking fairness in the eyes of the 99%. We think availability as well as proper utilization
of Big Data in the Finance industry will overall help the 99% and we will tell
you why in 1 word… TRANSPARENCY! In many
cases, Wall Street thrives on lack of transparency in order to hoard the little
financial information available, and uses that info to profit against the 99%.
7 years ago, Big Data’s first major impact on Wall Street
began, when Stock exchanges began to migrate towards electronic trading. Average transaction fees went down, many
specialist trading firms closed or consolidated, and the online brokerage model
was able to thrive. Big Data made this
possible because it made information rapidly available to near automate the market
making process. These drastic improvements
made possible by Big Data regarding transparency were only the beginning…
The “Subprime”
Financial Crisis created an even Greater Demand for Big Data!
After the Subprime blow-up, increased regulatory standards were
rolled out worldwide. Risk management and process controls around financial
services became a priority, and demanded better utilization of data. Now, major investment banks have bulked up
their risk management systems to a point where regulators are somewhat content
as the regulation evolves. The Big Data
within major banks was not being utilized effectively and regulators needed to
step in to put a universal risk framework in place to do so. According to the notorious McKinseyBig Data Study that we love to refer to, Securities Trading and Financial
Services have now generated and manage some of the largest numerical/text based
databases in the world!
Big Data’s Next Major
Impacts on Banking & Investments
“Together with a new breed of
cloud-based portfolio analytics and performance management solutions, data
aggregators are providing an IT solution to a client service problem. Key to
these alliances is the ability to turn Big Data insights into a beautiful,
dashboard-like view of portfolio performance so that both portfolio managers
and their clients get a complete view of a portfolio’s performance and have
total confidence in the completeness of the information that underlies the big
picture.” SOURCE -Andrew Peddar, CEO StatPro America
This is Transparency, exactly what legitimate value investors
love and banks fear! As Big Data in a
useable format becomes quickly and cheaply available to investors and financial
markets, the OTC (“Over-the-Counter”) business model is being constantly questioned
for more standardized asset classes. These
OTC securities are traded outside of a formal stock exchange because the
products are specialized and often need sales people to interact with buyers. Some asset classes that still remain OTC are
corporate bonds, municipal bonds and many of the troublesome mortgage bonds
that were at the heart of the credit bubble.
Big Data is starting to Revolutionize the traditionally profitable OTC space for major Banks...Stop back to find out why in Part
2 of our Financial Review in the next couple days!
Definitely interesting. You always read articles portraying high frequency trading in a negative light, but it's interesting to read about the positive implications as well - more transparent pricing and lower transaction costs. Does your article include algorithmic trading also? Looking forward to part two.
ReplyDeleteThanks Tara, we will get to that in Part 2, please stay tuned!!
ReplyDelete