Thinking back over 20 years in banking and finance, I often reminisce about moments that will stick with me forever. One day, I was sitting in my office on a sunny Chicago afternoon, the US trading day was coming to a close and one of the junior traders came barging in. He looked at me and said without any hesitation, “Lis, your job sucks. The only time someone comes to see you or calls you is when there’s a problem.” All I could do was laugh at him…but he was right. A quiet day in most people’s worlds means there’s a problem – no sales calls, people are on vacation, the sky is falling. But in the world of financial data, silence is golden.
Understand the Vision
Managing data is a controlled partnership – it requires significant communication and planning from the beginning. It’s truly a marriage of ideas and strategy, a well-orchestrated combination of planning and execution that, if done correctly, results in positive returns, managed costs and increased cash flow. And let’s face it: for today’s business leaders isn’t the bottom line what it’s all about?
Controlling and managing data is like building a house. First you meet with the architects: in our world, the traders and strategists, and you discuss their vision:
- What do they need in terms of data – how much history do they need, adjusted or unadjusted or both?
- When do they need it prior to market open of their respective trading days?
- What other variables do they need? Oh you’re trading derivatives, you need detailed insight into futures and the underliers. You’re trading convertible bonds, you need your rights as a bondholder with regard to that upcoming dividend payment.
Ask questions! There is no such thing as a bad question, only the one that goes unasked. As we’ve said time and again is this month’s blog series, data is the infrastructure, the support that makes your structure strong and durable. No market hurricane is going to take down your house!
Make a List
I read a book a few years ago by Dr Atul Gawande, “The Checklist Manifesto: How to Get Things Right”. His premise is that all tasks, regardless of complexity, can be broken down into a checklist of tasks that, if you replicate it every time, ensures a positive outcome. He uses an airline pilot as one example – each time, regardless of the number of hours a pilot has flown, he goes through a checklist before he ever takes off the ground. Every time! Skip that list and he puts lives at risk. In our industry, making the time to engage the data teams and consumers each and every time is the equivalent of going through that list. If you skip the engagement, you risk your reputation and your business. The key is that you have to understand the task and necessary outcome, each and every time. If you’re launching a new trading strategy and you don’t engage your back office team, trades will fail. If you’re the risk manager who isn’t talking daily to your portfolio managers about strategic portfolio alignment and validating the balance and performance of their portfolios, you put the firm at risk for catastrophe.
Finding the Silence
So how do you get through all the mayhem to find the golden silence? The place where everything has worked as it should, and nobody is knocking on your door? Silence comes in stages – we tend to think of As an example, let’s talk about understanding a long/short strategy, which is a data intense strategy: historic prices, historic earnings, historic volume, dividends – anything that helps the traders better understand their exposure and ensure the results of the calculations. Step one is to understand Data’s role in minimizing or reducing as close to zero downside risk. If you start layering on hedging strategies to continue to drive down risk and exposure, well now you need to include options and other derivative products. Options at-the-money now may not be ATM tomorrow.
So fair to say, the more complex the strategy the more complex the data requirements. What about that 3:2 stock split that’s going to be effective Monday. What happens to my options – are they being re-issued? Do I have to sell out of the old series? What impact will it have on my cash holdings? Be prepared!
The key for anyone engaged in data on a daily basis is to admit it’s an ugly, dirty, nasty business and you had better have some thick skin. But, getting it right – there’s no better feeling. Imagine that you can walk onto a trading floor and no one has a reason to should at you. Reaching a point of full understanding takes years. Working with these complex tools and traders requires that a data person always be on their game. Great data, paired with great applications makes for daily wins. Developers who partner with data experts make sales and trading significantly more powerful. The conversation needs to be a dialogue between colleagues constantly working to make it better.
I grew up working in one of the biggest data vendors on the street. Well, we were about 50 people globally at the time – so we weren’t big then. We constantly heard, you have this data item, your competitor has something else. Why? You have this accrued interest calculation. Why? You have this capital event flagged as a special cash payment. Why? We’d have to go off and research what the source of our data point was as well as understand why the competitor had what they had. Talk about time consuming. But time well spent. We not only had the benefit of documenting and engaging our clients in our process but understanding the nuances of our fellow data vendors. In the process, we built an incredibly, invaluable data warehouse. That’s how great applications are built – it’s a collaboration between client, data, development and product working and building the understanding necessary to move towards a common successful implementation.
So the ability to understand strategies and objectives, to map it all out, create that checklist, define the requirements understand the usage and, most importantly, deliver it consistently, completely and accurately – well if you do all of that, you can sit back and enjoy a moment of silence.
BI-SAM GO - the web-based asset management solution for daily transactional performance and attribution analytics - cleanses, flags and validates your market and index data, while giving you the tools to identify any data issues before production begins. This level of transparency means less time spent checking and cross-checking for data accuracy.