LSEG’s take on decentralized finance, data catalogs and managed data services

A number of London Stock Exchange Group’s (LSEG’s) senior business leaders spoke at the annual World Financial Information Conference (WFIC), held recently in Prague. Stefan Reichenbach, John Mason, Janelle Veasey, Stuart Brown and Jason West, alongside others, participated in wide-ranging discussions, the common theme of which was data and its various opportunities and challenges across the capital markets.

Topics at the WFIC ranged from decentralized finance (DeFi); the ever-present issue of increasing data volumes and what they mean practically to capital markets firms, the financial information industry and what firms are looking for from data providers in the post-Covid-19-pandemic dispensation. WatersTechnology caught up with the LSEG quintet in the run-up to WFIC to get a snapshot of what discussions they were expecting.
 

DeFi the disrupter

A lot has been discussed in recent months about the latest darling of the fintech industry—DeFi. Essentially, DeFi is an alternative and decentralized framework governing how business across the capital markets is transacted using a form of distributed-ledger technology (DLT)—specifically blockchain. The DeFi movement is still very much in its infancy, but initial indications and use-cases appear to have found a happy home for the technology in the form of the fast-evolving crypto market.

“We’re in the first innings of the technology transition [from the incumbent framework to a new paradigm],” explains Stefan Reichenbach, global head of pricing and commercial strategy in LSEG’s Refinitiv business. “A lot of the DeFi space is relatively immature and there’s still a lot of work to be done before it gets to scale. That said, DeFi is about DLT and the big difference from the existing financial services industry is that the technology works on a separate paradigm. Where today the financial infrastructure works on the reconciliation of centralized databases, as you move across [to the DeFi framework] you have a shared ledger that is distributed and decentralized. That allows you to do all sorts of things, especially the creation of smart contracts, which drives the DeFi opportunity.” 
     

Opportunities

According to Reichenbach, there are short- and long-term DeFi opportunities from LSEG’s perspective. The immediate opportunities, he says, are around the firm’s current core business: real-time and reference pricing of cryptocurrencies in particular; the firm’s risk intelligence services (the Refinitiv World-Check Database), which a number of crypto-focused entities use to carry out their anti-money laundering and know-your-customer obligations; expansion of the firm’s existing index business to include digital asset indexes; and trading connectivity through its recently acquired Tora subsidiary. Tora provides trading technology and connectivity services to a number of digital exchanges. As for longer-term opportunities, Reichenbach is understandably less certain, given how fast the industry continues to evolve.

“Right now, when you look at the information available on DLT, it’s all cryptocurrency-related,” he explains. “For the full potential of DLT to be extracted, we need to get to a position where trustworthy off-chain data is made available on-chain, and I think that’s a great opportunity for information providers like LSEG. We have looked at that space, but it’s still quite immature,” he says.
 

Data catalogs to the rescue

The perennial challenge of too much information was an ever-present theme that permeated the panel discussions in some shape or form during this year’s WFIC. It’s a challenge that even the most sophisticated capital markets firms with the healthiest budgets and most experienced technology and data teams struggle with on a daily basis by virtue of the sheer volumes of data they produce and consume. Storing, surfacing and sharing information across the business is no trivial task. Neither is the vexing issue of data licensing agreements—specifically with respect to who is allowed to use data that is sitting within a firm’s data repository, and how they’re allowed to use it.

Data catalogs may present the industry with a solution to meaningfully addressing all of these challenges in one fell swoop—much in the same way that Spotify does in the music industry.

John Mason, group head of platform at LSEG, explains: “I think they are [a solution to the problem], and they will become a fundamental part of the data industry, because, as we move more towards digital content, people are going to want to understand exactly what access rights they have to their data, because licensing agreements can be quite complicated—they could entail various legal entities or be jurisdictional.

“In the past, people have looked to consume data and understand whether they have the right to use it in a certain jurisdiction or team, but what we’re increasingly seeing is people looking to understand whether their clients can use their data. Organizations are increasingly looking to supplement their capabilities and services with additional value-added services as a means of differentiating their platforms in the marketplace.” 
   

Perennial challenges

As much as capital markets firms have, in recent years, morphed into entities resembling specialist technology and data organizations, their fundamental objectives of making fast, accurate and transparent business, operational and investment decisions—either on behalf of the firm itself or its investors/clients—remain the same.

“Clients don’t want to move data around anymore—they are increasingly looking to interact with data in the cloud rather than ingest it, store it and distribute it internally,” Mason says, adding that the primary driver of the move to cloud-based data services is increased market volatility on the back of uncertainty around Brexit, the Covid-19 pandemic (and subsequent unprecedented market volatility towards the end of the first quarter of 2020) and, more recently, the geopolitical turmoil in eastern Europe. “When there’s volatility, people start looking for data to ask and answer questions, which means data volumes increase,” he says. “Firms are also looking for simplification of architecture and who they deal with, and that is primarily a cost driver—they are increasingly looking to lower the cost of working with data and that means simplifying their architecture by, for example, working with a single application programming interface [to access all of their data].”
 

A light touch

Finally, there was a joint discussion with Janelle Veasey, group head of real-time at LSEG, and Stuart Brown, group head of enterprise data solutions at LSEG, the focus of which was the challenges facing LSEG’s clients and how, as an organization and data provider, LSEG is addressing those challenges. It goes without saying that capital markets firms on both sides of the industry are looking to reduce wherever possible the heavy lifting associated with data sourcing, collation and management so that they can focus on their core, higher-value tasks. It’s an area on which, according to Veasey, LSEG has been focused for some time now, which she describes as a “light touch” from LSEG’s clients’ perspectives.

“One example of that is our Real-Time Managed Distribution Service,” she says. “We’ve had huge demand from customers to move that service from a private cloud into the public cloud, and so we’ve run an in-year accelerated program to get that up and running. We’ve had some of the fastest early adoption of the service we’ve ever experienced.”    

A second area in which LSEG is looking to lighten the load on its clients is around its tick-data business featuring more than 30 years of historical data, which—when combined with individual packet data courtesy of its MayStreet business (acquired in May 2022)—is especially costly and onerous to manage in-house for all capital markets firms, regardless of size. “It comes back to customers wanting to pay for what they consume and consume what they pay for, and having some transparency around that,”  Veasey explains.
 

Customers want choice    

There is little doubt that there has been a significant uptick in demand for managed data services from capital markets firms across the board, many of which used the early part of the pandemic to do something of a stocktake and reevaluate their day-to-day business and operating models. This is an area LSEG has been active in for more than a decade by virtue of its Refinitiv business. “We’ve been providing managed services for over 12 years,” Brown says. “This concept of managed services is not a new thing to us. When clients started to ask more about what we could offer, we were in a position to react really quickly.”

According to Brown, customers are ultimately looking for one thing: choice. LSEG is well placed to address that need, regardless of firms’ specific requirements. “We’re offering them choice across the latency spectrum, particularly now after the MayStreet acquisition, which allows us to offer ultra-low-latency, low-latency, real-time, conflated, intraday and historical data,” he explains. “We also offer clients the choice of how they want to consume that data—on-premises or in a private or public cloud. That’s the service we provide our clients, which ticks many boxes—that’s the trend.” 

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