Refinitiv has announced the findings of its ‘A New Dimension of Data – Building an Open and Trustworthy Alternative Data Ecosystem report in collaboration with Open Data Institute (ODI), within which the firm has called for greater industry standardisation around the collection, distribution and use of alternative data (alt data).
The report was written using desk research, user research interviews with 13 professionals in the alternative data space and an expert roundtable of 12 participants and Refinitiv says it comes at a time when the world is challenged with understanding the enormity of available data and information. Investment managers, traders and investors are tasked with finding the right data, making sense of it, and ultimately actioning it. “Unstructured information, the explosion of alternative data, and the need for trusted sources makes an already daunting task even more complex,” it says.
According to the report, with over a thousand purported alt data sources, hundreds of case studies and millions in global spend, the alt data sector seems to be gaining traction, however it remains a very small part of the multibillion-dollar market for access to stock market and other financial data. While the governance and norms for the licensing and distribution of traditional data are well established in many countries, the alt data market is at an early stage, it observes, adding that best practices, codes of practice, regulations and standards have not yet been fully established.
“Enabling the integration and use of such a disparate set of data sources will require the development of a new set of standards,” Refinitiv says.
The report addresses key considerations for understanding and standardising alternative data, including a discussion of what exactly constitutes alt data, how it is accessed used and shared and the ethical and legal considerations that need to be taken into account. It also proposes steps to improve access to alt data and makes recommendations on how the industry can progress.
“The rise and success of quantitative analysis and investing using alternative data has taken the broader financial community to an inflection point when it comes to understanding, sourcing and applying these data sets to add greater insight and investment value,” says Austin Burkett, global head of quants and feeds, Refinitiv. “At Refinitiv, we believe that alternative data ought to be standardised and where possible, normalised in order to improve data quality and reliability to better serve clients with the highest ethical and legal considerations.”
Jeni Tennison, CEO of the ODI, adds, “Working in collaboration with Refinitiv on this Alternative Data report has allowed us to investigate an emerging data ecosystem: data used by investors to help evaluate a company or investment that comes from new and unique sources. There is a market for this. For example, some companies are analysing real-time sentiment data, in the form of positive or negative social media posts and making predictions on company performance before any traditional data is released from the company. However, we have found that the ecosystem is struggling from a lack of standards and transparency, creating issues around privacy, intellectual property, and trust.
“In order to build an open and trustworthy alternative data ecosystem the ethical, technical and practical issues need to be addressed,” she adds. “In the report we highlight tools such as our ‘Open Standards for Data’ handbook, which can help drive adoption of standards, and our Data Ethics Canvas, which can help organisations identify and make decisions about potential ethical issues.”