The fuel that powers the financial markets is a potent combination of real-time news and market data. Whether it's the release of a company's quarterly earnings report, the actions of central banks on interest rate policies, a significant merger or acquisition or a default or bankruptcy by a major debt issuer, market participants react to news every trading day. Events like these, big and small, drive trading activity.
Because news inspires action, traders ultimately rely on accurate and timely market data as a basis for their buy-sell decisions. Trillions of dollars in stocks, corporate and government bonds, futures, options and a seemingly limitless number of exotic, over-the-counter derivative instruments - such as swaps or collateralized debt obligations (CDOs) - are bought and sold worldwide each day. Collecting, massaging and disseminating all of this trading data is the job of the information providers - the companies in the financial information industry.
The principal players in this realm are Reuters, Bloomberg and Thomson Financial, a unit of the Thomson Corporation. All three companies have extensive news operations and employ hundreds of people to gather and scrub for accuracy the data they redistribute to market professionals, corporate clients and other organizations. Another, smaller player is Interactive Data, which is 60-percent owned by Pearson PLC, publisher of the Financial Times. Interactive Data's subsidiary products include Comstock, which distributes a real-time feed of market data, and FT Interactive, a supplier of data to institutional clients.
In addition to the data suppliers, many other companies operate in specialized segments of the industry. Some are software developers building sophisticated tools and trading programs. Others focus on news or market analysis. Dow Jones & Company, whose Dow Jones News Service has been covering the markets for more than 100 years, is one example of the latter. Its content can be delivered through distribution partners or directly to clients. The company has also created numerous indexes that now form the basis for tradable securities. Many lay people know Dow Jones primarily through its flagship product, The Wall Street Journal.
Vendors like Reuters and Bloomberg not only distribute data to the financial industry, they also collect it, then consolidate and sell it back to the same institutions that initially generated it. In over-the-counter markets for bonds, foreign exchange, financial derivatives, and so on, pricing is supplied by dealers and brokers. For example, the trading desks at large investment banks like Citigroup or Goldman Sachs generally supply prices for securities that are in their inventory. Think of those as the advertised or list prices, which can differ from actual selling prices. Brokers, on the other hand, are middlemen, and the data they provide reflect actual transaction prices. Cantor Fitzgerald was one of the first firms to report the prices for trades it brokered in the market for U.S. Treasury securities, which it still resells through its subsidiary, Cantor Market Data. Other major suppliers of data feeds are the world's stock, commodity and options exchanges.
When the Internet first became popular, data vendors feared their role would become less important as more information became available directly to investors and bankers alike. That trend has proceeded more slowly than originally feared, although it has driven consolidation in the industry.
Roles and Career Paths
The diversity of companies in the financial-information sector makes it difficult to describe a single, precise career path. However, there are certain attributes that will lead to career success.
Foremost is a strong understanding of how the markets operate, which will be critical whether one enters a sales, operations, data management or technical development role.
Technology expertise can be another important skill. Trading is increasingly moving from telephone based, person-to-person transactions to screen-based dealings that are driven by sophisticated software programs. People with the skills to create the algorithms that drive these programs are in increasing demand.
The field offers numerous entry-level opportunities. Information companies seek individuals with a statistical background or financial training for the teams responsible for ensuring their distributed data is accurate.
For an overview of the kinds of companies involved in this industry, see the member page of Software and Information Industry Association's Financial Information Services Division at www.fisd.net/about/members.asp.
Skills & Qualities
- Strong understanding of the financial markets or the ability to learn.
- Analytical and statistical skills.
- Good oral and written communication skills.
- Technology aptitude or programming abilities.