Spring Summit Recap – Day Three
Day three of Neudata’s Spring Summit focused on the overall data landscape and included sessions relevant to both buy-side data users and data vendors.
Neudata’s CEO Rado Lipuš kicked things off with a panel discussion on the growth of M&A in the alternative data market. He was joined by Latham & Watkins’ Shing Lo, EAS Innovation’s Evan Schnidman and Sovereign Capital Partners’ Jonathan Thorne.
The alternative data universe has seen some significant consolidation over the last several months, with mega-deals like S&P’s acquisition of IHS Markit along with smaller ones like FactSet’s decision to buy TruValue Labs. Part of the reason for the influx of activity is that large corporations face high barriers to entry in the data space, so one way to grow their offerings quickly is to acquire other data providers, the panellists said.
At the same time, those larger players are realising that their core product — market data — is becoming commoditized and that alternative data can generate additional recurring revenue streams. The speakers noted that firms are looking to acquire companies that give them access to ESG and private market data.
The group also discussed the challenges that smaller data providers face when going up against the big players, namely in distribution. One presenter noted that smaller providers might have better data or the ability to provide better insight, but it’s very hard to displace a large player if the data is only marginally better. The speaker went on to say that we could see a wave of larger firms buying up smaller providers to focus on solving this problem.
Next, Shane Conway from Kepos Capital presented on the challenges and opportunities surrounding the production of trading signals. He noted that alpha capture covers a range of data where the buyside collects actionable trading ideas from external sources.
Stuart Coleman from the Open Data Institute then discussed the importance of ensuring an open and trustworthy data ecosystem. Coleman outlined how different types of data could be shared more openly and discussed the UK policies he helped design that initiated Open Banking. Open Banking is a regulation that allows banks to share data in the digital age and has spawned a plethora of banking fintech startups, some of whom provide data to the financial services community.
In our final session before the afternoon break, Matt Napoli and Colin Marden from AWS presented on tools for finding, cataloguing and visualising ESG data.
After the break, Neudata’s Jose Elias Terriquez discussed what could happen to alternative data under the new US presidential administration. He noted that alt data users should expect to see tighter regulations in the space, particularly as the SEC ramps up its focus on due diligence within the industry.
He also discussed the increased likelihood that the US will pass a federal consumer privacy law, noting that places like California and Virginia have begun the process at a state-level. While consumer privacy will probably feature on the Biden agenda, he predicted that data users will have time to prepare and the final bill is likely to be less strict than California’s CCPA due to lobbying efforts.
Alexander Romanenko from AIG then took to the virtual stage to discuss setting up alternative data services inside an organisation. He spoke about organisations’ journeys to build full-stack AI-first product teams.
Then, participants listened to two case-studies from Placekey and Gridwise. Placekey’s PJ Hagerty discussed how vendors and the buy-side can use the Placekey tool to connect various sources of location data, while Ryan Green from Gridwise presented on using ride-hailing and food delivery marketplace trends to inform investment decisions.
The final sessions of the day were focused on legal and compliance issues. Kelly Koscuiszka from Schulte Roth & Zabel LLP first spoke about the steps data users and vendors should take when a vendor is sued. Koscuiszka gave an overview of the regulatory framework affecting investors in the US, including insider trading laws and Section 204A of the Advisers Act. She also outlined privacy and data security considerations, including a changing privacy litigation landscape and the issues with data that’s collected/shared in breach of privacy laws, as well as data re-identification and security concerns.
She also advised vendors to be proactive about disclosure and come up with a strategy to communicate on pending litigation with their data buyer clients.
Neudata’s Don D’Amico then pivoted to a data provider-focused panel to explain how to overcome common challenges when working with the buy-side. He outlined three common challenges, including contracting with the buy-side, demonstrating the “right to provide” data and tracking customised deliverables.