Alternative data has become a hot topic on Wall Street, but Nasdaq’s CEO says the US needs better data privacy policies
Wall Street’s consumption of alternative data has shown no signs of slowing down, but industry experts are calling for guardrails to be put in place to keep the $7 billion industry under control.
Adena Friedman, Nasdaq’s CEO, said the US needs to improve its policies around data protection.
“I personally believe the United States has a lot of work to grapple with this issue of privacy and that sense of ownership over your personal information,” said Friedman while speaking at an alternative data conference on Thursday.
The exchange group’s head honcho cited Europe as an example of a region that is further ahead than the US. The European Union put in place a data protection law in 2018, known as GDPR, that allows local regulators to fine companies up to 4% of their global revenue for significant data breaches.
And while Europe has been particularly progressive in its efforts, Friedman noted the same can not be said for other regions.
“In other parts of the world, they are not even going to make an attempt,” Friedman said. “You just don’t have a sense of privacy.”
Friedman said creating better policies around personally identifiable information is the area most in need of guidance. Doing so would benefit individuals looking to protect their data and firms trying to grasp what they are able to use.
“Rules and regulations are going to have to start to come in to bear. To understand not only what other companies have the right to retain and right to use, but also potentially the value of that information to the individual,” Friedman said.
Hedge funds spend billions of dollars a year on alternative data sets with hopes the obscure, non-traditional information will give them a competitive edge in the markets. But as the market grows, warnings have risen against risky methods that some providers have used to obtain cutting-edge data.
Still, that hasn’t stopped traditional data providers from getting involved in the space. Bloomberg recently announced it would offer access to more than 20 alternative data feeds. In late 2018 Nasdaq acquired Toronto-based Quandl, which provides alternative data to some of the top Wall Street firms, for an undisclosed amount.
Friedman said Nasdaq and Quandl are both committed to avoiding distributing any data that might fall in a regulatory gray area.
“If it is something that is really, really confidential, and somehow we get ahold of it, that is not what we are in the business of doing,” Friedman said. “If it is something where the company gathers it, it is their information and they have the right to it and they want to share it because they see a commercial opportunity with it, then we are a good partner.”
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