JPMorgan Chase, Goldman Sachs and Morgan Stanley are teaming up to clean and store reference data at a cheaper price than it would cost for them to undertake the process individually, according to people close to the matter.
The banks will create a joint data company that will provide data which each entity can use to help determine pricing and transaction costs, The Wall Street Journal reported Wednesday (Aug. 19).
Sources told WSJ the initiative is called Securities Product Reference Data, also known as “SPReD,” and it may be launched within the next six to 12 months. Each founding bank is reportedly investing “seven figures” into the endeavor.
The company will work with the reference data on financial instruments, starting with listed derivatives and equity data, with fixed income data to follow later, WSJ said. The project will allow the banks to join together to take care of cleaning and storing the vast amount of data, rather than each doing the task individually.
Market data is typically used by banks to help save on transaction costs, but first it must be run through their systems and “scrubbed” to produce consistent and ready to use “golden copies,” one of the people familiar with the matter said.
This collaborative effort is only the latest example of how growing pressures are resulting in cost-conscious banks teaming up to save on expenses. Big banks are now looking for innovative ways to save money, which can include strategic partnerships.
Among the six biggest U.S. banks by assets — which are JP Morgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley — non-interest expenses jumped 11.9 percent from 2009 to 2014, WSJ confirmed. These expenses include salaries, investments in technology and compliance costs.