Michael Shashoua: Valuable Parallels

What Stays in Vegas: The World of Personal Data—Lifeblood of Big Business—and the End of Privacy as We Know It by Adam Tanner, published on September 2, describes the ways that the personal data industry has begun to capitalize on the value of data that the financial services industry has known and leveraged for much longer.

Brokers of personal data—companies such as Acxiom and Experian being among the larger ones—do have inaccuracies or out-of-date information in their data, as Tanner writes. These brokers, along with Facebook and many companies outside the e-commerce realm, continually try to get consumers to volunteer information about themselves. Facebook’s data privacy issues have themselves yielded an object lesson for the financial industry on how users can feel violated if the data they generate is misused, precisely because that data itself has value. (For more on this, visit irdonline.com/2352619.)

It isn’t possible to attempt the same consensual harvesting of data in the financial industry. Participants are well aware of the value of their data. Still, some organizations do at least try to champion open standards, like the EDM Council’s promotion of the Financial Industry Business Ontology (FIBO), intended to coordinate taxonomies for fixed-income reference data. Supporters of FIBO contend that a common taxonomy, used with data models and transport layers, can form a mechanism that works for the market as a whole.

Recognizing Data’s Value
Retail consumers, as Tanner points out, are confronted with terms of service agreements filled with legalese that allow the companies that draft that boilerplate to change their own rules for selling data they collect, at any time, in any way.

Although some consumers have chosen not to patronize certain companies over this data privacy issue, participants in securities exchanges have at times tried to fight for control of the data they generate—or at least not to be charged to access it. Last year, Sifma appealed to the US Securities and Exchange Commission (SEC), claiming that fees for proprietary market data charged by several US-based exchanges are illegal.

Could CDOs who are gaining traction and power over data management, weigh in on the issue of data ownership?

But financial services firms cannot opt out of generating data for the exchanges. That’s inherent with their trading activity. They also cannot practically opt out of obtaining market and reference data if they still want to trade and manage assets in an informed fashion. The exchanges may be way ahead of where brokers of personal data are, in terms of deriving and locking up value from data, but they also face the prospect that those who generate and provide the data could chip away at their hold on valuable information.

Challenge for CDOs
Could chief data officers (CDOs), who are gaining traction and power over data management in the industry, weigh in on the issue of market and reference data ownership? Could they lead an effort to assert ownership rights to data? They have begun to advocate for more say on data operations and governance. A recent survey led by Broadridge Financial Solutions found that CDOs could aggregate risk data to populate risk models designed by chief operating officers.

CDOs are also advocating for centralization of data management and governance, in order to get better oversight of reference data. They are saying this would be accomplished by reducing the complexity of data, thus raising the quality of the data.

This suggests the question—if one party can “own” data, which party “owns” the quality of that data—and the responsibility that comes with that ownership? That’s a question that CDOs will have to endeavor to figure out. Doing so would put them in better stead to take on the dispute with exchanges over data ownership. That dispute is certainly a much greater fight between opposing interests, unlike differences within firms that have a chance at being solved collegially.