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investments. “We believe clients will pay
a premium to custodians for performance
analytics supported by APIs (application
programming interfaces) which are high-
er frequency, instant and more accurate
than what they are currently receiving,
namely an end of day report,” says Pearce.
Others agree custodians need to tailor
their data products properly. “Any cus-
todian looking to generate a meaningful
revenue stream through creating stand-
alone data products for the broader fi-
nancial community by applying advanced
analytics to their own data exhaust will
only be able to do so if their data is truly
unique and the analytics off the back of
it are also equally impressive,” explains
Matthias Voelkel, partner at McKinsey.
“This is a high bar. I believe custodians
should absolutely be exploring big data,
but the most interesting use cases might
not be stand-alone data products for the
broader market, but rather value-added
products for their existing customers.”
Is mining big data a big regulatory
minefield?
Having been lightly – if at all – super-
vised, the big data policies at technology
companies are now firmly under the gaze
of regulators following the aftershocks
of the Facebook/Cambridge Analytica
scandal.
The UK’s Financial Conduct Authori-
ty (FCA) has gone further and recently
The big data tightrope
warned banks about data misuse, with its
Custodians have a lot of information
head Charles Randell affirming the topic
about clients and markets sitting idle on
was a major issue and now top of the
their desks but finding a way to mone-
regulator’s agenda. Custodians therefore
tise it is going to be hard. If clients are to
need to tread carefully, particularly as
purchase big data driven analytics or spe-
a number of lawyers have advised fund
cially tailored solutions, then the products
manager clients to be extra diligent when
need to serve a useful purpose and be set
using third-party data analytics.
apart from the competition. If the custody
Prudence around data collection and
industry manages this, then data analyt-
usage is unconditional following the in-
troduction of the General Data Protection ics could turn into a nice regular income
stream, offsetting some of the declines
Regulation (GDPR), along with its hefty
fines for non-com-
pliance.
“It is now the custodians’ job to enable
“GDPR compli-
clients to have better and more effective
ance is a must for
access to their own data.”
all companies, and
it is critical that
DAVID BRENT, JP MORGAN
providers ensure
data is being used
seen elsewhere in the business, such as in
appropriately and there are no breaches
securities lending or FX execution.
of the rules. Data security is also abso-
Banks do need to be conscious though
lutely pivotal, and this can be achieved
of the public and political criticism about
by having state of the art cyber-security
big data following the abuses revealed at
protections in place,” says Voelkel.
some of the major technology companies.
Pearce adds data security and data
integrity are essential for custodians mov- Regulators have forewarned banks that
any exploitation or mishandling of data
ing forward. “It is in the industry’s col-
will be investigated, and this guidance
lective interest that we all work together
should be onboarded entirely by custodi-
to achieve the highest standards of data
ans. While banks need to be bold in their
integrity and security. We are incredibly
careful in terms of the data we access, and big data ambitions, they must also be
compliant in the approach they take.
how we amalgamate it.”
January 2019
Securities@Sibos
21