The recent passing of a six-month "anniversary" of the GameStop share trading saga, in which hedge funds were attacked by retail investors trying to thwart short-sellers, reminds us of the need for trading platforms to adapt to new realities. And wealth managers should take note. We talk to SIX Financial Information.
In a bizarre year such as this, when the world remains roiled by COVID-19 and the measures to tackle it, market events have passed rapidly. The extraordinary share price moves of early 2021, when retail traders using platforms such as Robin Hood sought to dethrone hedge fund short-sellers seem a lifetime ago. The GameStop entertainment business in the US was at the eye of that particular storm, but other businesses' share prices were affected violently.
The drama of these events should not be forgotten. They highlighted not just the behavioural patterns of investors with time on their hands, but what can happen in a world of zero official interest rates, rapid-fire trading technology, and a certain desire to strike the mighty.
One of the takeaways for wealth managers is that the investment maturity and sophistication of the next generation should not be taken lightly. If they expect to generate 10 per cent – 15 per cent revenue out of their capital – wealth managers need to adapt and deliver quickly.
This news service recently spoke to SIX Financial Information, the financial information supplier. Such a firm has a ringside seat on the kind of information flows around markets, and the sort of issues that the share trading frenzy of early 2021 raised.
The firm is one of the largest of its kind in Europe, providing front-, middle- and back-office data, with notable business volumes in Switzerland, France, Benelux and Scandinavia for the middle- and back-office segments. We talked to Tamsin Hobley, country head of UK and Ireland at SIX.
WealthBriefing: Don’t wealth managers already have access
to real-time prices if they work in firms with terminals from
vendors such as Bloomberg, Refinitiv, others? What specific type
of advisor are you engaging with?
It is clear that modern-day wealth managers are faced with a number of challenges in both the immediate (COVID-19) and long-term future. They need a real-time view of data to manage risk. In this way, it must be recognised that firms need access to more timely and broad data as well. This includes regulatory, reference, valuations pricing, corporate actions, tax, sustainability and insight data. This also means that in order to navigate themselves through future bouts of unexpected volatility, firms must combine this with more automation to keep in line with the increasing demands of investors.
In terms of who needs to adopt these strategic changes, SIX aims this at both execution-only and also portfolio investment managers. We provide complex value-add data propositions to these wealth managers, as the provenance and purity of data and the security of the decisions made are crucial to managing risk.
WB: Some HNW private clients who want to trade can do so
via platforms from Saxo, Barclays Stockbrokers, IG, etc and some
of these platforms will have a fair amount of data. What aren’t
they giving clients?
There are many platforms providing clients with substantial data. Ultimately, this is not only a question about the raw data that investors are provided with, but that wealth managers and private clients need insightful data, including data related to sustainability. This will in turn help them modify systems in line with the development of AI offerings in this space. It is about consistently keeping up with these changes, and at SIX, we provide clients with both the data and insight tools needed to navigate market volatility and change.
If advisors are looking after clients trading on
platforms, what sort of tools, data and analytics do you think
such advisors need?
What our clients require is broad and diverse. Based on the current climate, it is clear to us that advisors need access to suitability and compliance data, meaning that the right financial instruments are lined up to the right investors. Moving forward, it is also key for advisors to have access to other regulatory and tax optimisation data, on top of reference, pricing, and corporate actions data too.
With the rapid growth in popularity of ESG investments, advisors will also seek access to accurate and insightful ESG data that helps them separate the “green” from the “greenwashed.” In this area, using alternative data can be a major advantage for advisors. Alternative data provides real-time high frequency ESG scores and insights into a company’s reputation to help measure the sustainability and societal impact of an investment. We have recently announced our commitment to providing such insightful data through our investment in Orenda Software Solutions.
WB: Can you tell us a bit more about what SIX offers that
is distinctive? What “gap” is it trying to fill? Is it focused on
particular countries’ markets? What asset classes and types of
securities does it cover?
At SIX, we believe the future of finance is now. As such, we are always innovating and adapting our solutions to meet the changing demands of our existing and prospective clients. We constantly refine and enhance our data assets and offerings. SIX is a well-established brand that covers wealth and private banking in Europe, the US and Asia, using the same level of knowledge and expertise that we offer to the UK. SIX also offers a data package that is specifically tailored to UK wealth managers (including tax), providing them with the data they need now and the data they will need in the future. It is significant that tax data is becoming increasingly regulated and is no longer just the responsibility of tax advisors. This must now be a part of the overall product suitability checks too.
We have also recently acquired our long-term partner, international index and ETF data specialist Ultumus to boost our data offering and fill the gaps in the fast-growing ETF market, which is predicted to reach record assets of $9 trillion by the end of the month.
The highly volatile markets events of this year have shown that wealth managers can’t predict what is around the corner. When it comes to helping wealth managers overcome challenges, regardless of the event in question, the provenance of data and the security of the decisions made are crucial to identifying those all-important key risks.
Our existing solutions have continued to help our clients improve operational efficiencies by delivering end-to-end high quality reference data, valuation prices, corporate actions and tax and regulatory data. Our corporate actions solution is multiple award-winning, delivering data unrivalled in quality, accuracy and consistency to over 600 customers.