Supporting a large German bank with market data audits and structuring the market data reference

The brief

A major German bank asked us to support them with our expertise in several audits and their market data management in general. This support essentially related to two aspects.

1. Accompanying the audits by providing information for checking the auditors’ claims, checking the plausibility of utilisation and preparing market data reports. In addition, preparation of materials to critically scrutinise the information provided by the auditors and reduce the audit volume.
2. Reviewing and introducing processes for market data management and supporting line tasks. Support in the cleansing of existing market data authorisations and in the daily tasks of implementing market data management. Advice on the sensible use of licences and adjustments to data procurement with the aim of minimising costs while at the same time obtaining the data required for normal work in the appropriate data qualities.

The Bank’s infrastructure includes a considerable number of systems that can be used to receive, process and distribute market data. Accordingly, the routes for market data and the associated licensing requirements are comparatively complicated. In addition, a not inconsiderable number of contracts are required for the various market data purchases, which grant different rights to the users and which must be observed with regard to the correct use of data.

Our approach

To support the audit procedures and the associated organisational and technical adjustments in the line, the following main things were done:

1. Audit

• Review of the audit documents
  • Recording and checking the licence claims specified by the auditor
  • Investigation of the licence violations formulated and comparison with contracts concluded or to be concluded
  • Formulation of necessary measures to establish licence compliance
• Creation of reports from various technical systems to check current and historical market data utilisation.
• Comparisons of actual usage and authorisation switches with the auditors’ information and assumptions.
• Adjustments to the authorisation systems to achieve licence compliance.
• Documentation to prove the work for the auditors and to discuss the fees to be paid.

In audit processes, it is often the case that auditors make assumptions that are too negative for the customer in question. Such assumptions include user numbers that are too high, areas of use that are presented too extensively and fees that are generally set too high.
We analysed these requirements and checked them for factual accuracy.
Where differences arose, we provided appropriate information and supported the correction of these claims. We also mapped requirements for changes relating to the remediation of licence infringements and implemented them in technical systems. We created corresponding reports to document actual usage in comparison to assumed usage, thereby creating a further basis for discussion when negotiating lower licence fees.
The aim in each case was to create licence compliance while at the same time minimising the auditors’ fee claims.

2. Line work and process support

• Implementation of adjustments in the authorisation systems
  • Analysing assigned rights and checking existing users, sensible restructuring
  • Implementation of changes in the systems, removal of users that no longer exist and rights that are no longer required, creation of new users
• Suggestions for adapting processes when ordering and using market data
  • Review of existing processes, adjustments and additions where necessary
  • Analysis of missing processes and establishment and standardisation of new processes
  • Support with enquiries about useful processes
• Reporting
  • Creation of reports on authorisations and usage for market data managers and users
  • Customisation of reports for filling third-party systems
  • Creation of reports and information to map the requirements of market data suppliers
• Support for licence managers and users
  • Communication of licence requirements and preparation of explanatory documents
  • Discussion of intended uses and associated contractual requirements
  • Processing requests for the licensing and activation of market data

In many cases, changes to market data requirements, analyses of usage or standardised processes for implementing requirements in the area of market data management are structured rather informally. Much is based on individual knowledge and informally communicated requirements. There is a risk of granting incorrect switching or unlicensed use. Clean-up and checking processes are also not always established.
By supporting normal operations, we have gained information on how to support these operations in a meaningful way. In addition, we have established supplementary processes and procedures and pointed out problems with currently implemented procedures. Reports on currently existing authorisations and reviews of these authorisations by reporting on used and unused activations result in the deactivation of unused licence allocations that are subject to a charge.
By communicating with all stakeholders, users, purchasers and market data suppliers, we have improved the transfer of information and the understanding of rights and obligations of market data utilisation among all parties involved. We helped to clarify and document open questions and ambiguities in market data utilisation.

The solution and key benefits

In the area of audits, we were able to achieve a significant reduction in the licence payments to be made for the customer. In addition, we have eliminated recognised misuse and thus reduced risks for the future. Through the analyses and reports within the scope of the audits, we have shown ways of optimising usage that also lead to reduced costs in normal operations and the establishment of regular audits. With our support, we enabled the customer to better fulfil its licence obligations, make better use of the licences and minimise the risks of incorrect use. At the same time, we scrutinised established processes for market data management and the daily use of market data.

In the area of normal processes for managing the use of market data, we have established additional structures, pointed out the risks of previously practised procedures and minimised these risks. We have reduced costs and converted licences to more suitable licence types. As an additional source of information for specialist and technical questions and as experts in direct cooperation in daily work processes, we support the client in the operation and management of its infrastructures.