EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.
How EY can help
-
Know how our Capital Markets consulting team can help your business grow, manage costs and meet regulatory requirements.
Read more
Market data users include trading, banking, research and financing businesses; accounting and IPV groups; risk management; model development and testing; and regulatory reporting groups. These different groups require market data of varying frequency and recency, granularity, and corresponding to varying time periods. Historically, different groups have often sourced their market data separately, from different vendors, and often as part of other software applications and services. This can create challenges, such as the need for an extra reconciliation between the risk team’s daily metrics and those of the business, or even a potential regulatory issue if reported data are not consistent.
Business users
Front-office applications and analytics rely heavily on real-time data such as prices, spreads and yields to make informed trading decisions. Access to broader market information, including volumes, open interest and economic indicators, is also needed to understand market trends and dynamics. Execution algorithms and e-trading desks need large volumes of low-latency, real-time and historical market data to support trading, develop and test effective trading strategies, and produce execution quality analytics. Investment banking and research teams require broad access to static and historical corporate, market and sector data.
Pricing, valuation and IPV
Timely, accurate and consistent market data is crucial for pricing and valuation. Daily market data is carefully examined alongside trader marks to calculate end-of-day valuations. Product controllers and finance teams rely on market data to compute T+1 profit and loss, and to support IPV variance analysis. Importantly, inconsistencies in data used across these functions can lead to frequent reconciliations and pose financial risks to the firm. Ensuring the use of consistent and reliable data is essential to maintaining accuracy and mitigating potential risks.
Risk management and stress testing
Extensive historical market data, reflecting critical stress periods, is crucial for robust risk management and stress-testing capabilities. Near-real-time market data is required to support intraday risk monitoring activities, while spot market data is necessary for calculating risk metrics such as sensitivities. Historical market data needs to be accurate and enable the construction of continuous historical time series and calibration of risk factor shocks, for both business-as-usual and regulatory stress testing.
Model development and validation
Developing and testing pricing, risk management and capital models require consistent and reliable market data across a range of asset classes and instruments, as well as a common set of frameworks to address and remediate data quality challenges. Meeting current regulatory requirements also necessitates a broad range of market data: For example, the Fundamental Review of the Trading Book (FRTB) is an overhaul of market risk capital requirements; end-of-day market data and historical market data time series are critical components for its Internal Models Approach (IMA) development, including Expected Shortfall (ES), Stressed ES, Profit and Loss Attribution Tests (PLATs) and IMA Data Principles.
Firms that use high-quality historical market data time series in their risk and capital models may also realize financial efficiencies by mitigating the impact of inaccurate risk factor modeling and reducing unnecessary capital requirements.
Trading, analytics and reporting
Trade reporting and execution analytics are subject to heightened regulation and scrutiny, e.g., in Consolidated Audit Trail (CAT), Dodd-Frank, Markets in Financial Instruments Directive (MiFID II) and European Market Infrastructure Regulation (EMIR) — market data is crucial to these processes. Reporting requirements necessitate aggregation of data across different products and asset classes. Consistent market data, integrated with firm reference data and client transaction data, is essential for generating accurate and timely reports, as well as providing value-added client analytics. By combining market data with other relevant data sets, firms can also enhance their business reporting capabilities and derive valuable insights for clients.