Managed Services and Data Readiness to Manage Extreme Market Events

Brexit provides an example of how a managed services offering is helping clients manage and optimize their investment data to navigate market events

Liz Blake, Global Head of Front Office Services, BNY Mellon Technology Solutions

In the days leading up to the UK’s historic referendum to leave the European Union, polls were in a dead heat with a slight edge towards those that intended to vote to remain in the EU. When investors woke up to news that Britain actually voted to leave, it triggered a wave of selling around the world that resulted in the largest two-day sell-off on record with global financial markets losing some $2 trillion during the trading sessions that followed.

While the results took many investors by surprise, for the clients signed up with the Front Office Services Group (a group dedicated to the managed services around Eagle’s enterprise data management and performance solutions), the Brexit vote provided a case study to demonstrate the role of our managed services offering in helping clients prepare for the unexpected. For a managed services team, success may be best reflected in the ability of the front office to focus unencumbered on the markets, rather than worrying about the accuracy and availability of critical data or the firm’s ability to easily move into new investment types.

For instance, on the day the markets digested news of Brexit—when both currency and equity trading hit record volumes—managed services had worked closely with their clients to be prepared, at least when looking through a data management lens. This required the necessary groundwork to ensure that we understood the impact of possible market scenarios and their accompanying data needs as firms readied themselves to quickly rotate into new assets if needed.

Preparation for an event like Brexit requires consultation with clients to understand how the needs of portfolios may change. We sought to understand if clients were planning to explore potential de-risking strategies to employ infrequently used derivative types that could limit certain exposures and hedge against potential losses, enter new markets, or utilize rarely traded securities.  This consultation helped us coordinate with the various data vendors and providers across the world to make sure the appropriate security master information was available to support start-of-day activities and feed information to required systems. For those utilizing either new or infrequently used instruments, we also coordinated between the various functions to align the performance measurement and accounting teams, in addition to the front-office teams, with the aim of everyone working from the same appropriate data in their own systems.

One of the overlooked threats as it relates to data quality, for instance, can be the potential disparity in how different teams assess their data needs. However, one of the many mandates of our managed services offering is to help satisfy each function’s need for the data required to support their business process. This would include ensuring that standards are employed to lessen ambiguity around the treatment or calculation of securities, particularly those that are new or unfamiliar.

Beyond overseeing data quality and managing the validation and integration of data, our managed services team is focused on communication with our clients to help answer questions that may arise in a dynamic market environment. As part of our Brexit preparation, for instance, we established triage teams for each client to quickly identify potential anomalies in the files. We also took care to open frequent and proactive communication lines between our global team members and clients to provide feedback as needed.

When Eagle’s managed services offering took root, the overriding objective was to create a service that provides technology and operations expertise, allowing front-office clients to focus on their core competencies. Combining Eagle software experience with data management and performance best practices, the Front Office Services Group can help manage the burdens that come with validating, enriching and integrating data and then distributing this information in a way that meets the disparate demands that span the enterprise.

Even in a “normal” market environment, oversight and management of events like ratings changes, alterations to benchmark data or corporate actions need to be recognized in order for the correct data to flow to performance measurement and other downstream systems that support front-office needs. Whether providing support during an extreme market event or simply enabling the front office to easily shift into new investments, planning is an essential part of the relationship that the Front Office Services Group has with our clients.

The Front Office Services Group advocates a data-centric, best-of-breed approach to data management. It is one thing to merely keep pace with expectations in order to stay on top of reporting demands or regulatory compliance—but it is another when an investment firm can actually develop a competitive advantage around how they govern and utilize data to enable the investment process. In managing investment data for our clients, the Front Office Services Group plays a foundational role in helping world-class organizations differentiate from their competition.

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