Real-Time Data: Necessary or Not?
As a follow-up to Rob Chrisman’s April 9th post –
When technology improves, it takes a long time to bring everyone along. You will always have those on the bleeding edge as well as steadfast luddites. The vast majority will be somewhere between those extremes.
The reality is that most of us, to varying degrees, are resistant to or wary of change. We keep doing things the way we know how until we get to a point where either we have no choice or we finally have that epiphany that the new way is worth the pain of switching.
When I started traveling for business, I would print out maps for each location on my itinerary and carry a stack of paper with me. Over time, with smart phones and navigation apps, such a practice is obsolete. You can still accomplish the goal by printing out maps but why would you not avail yourself of the more efficient process.
We hear comments from time to time about whether real-time pricing is necessary for either the hedging or the best execution and loan allocation processes. The reality is that it is not necessary. Just like the map print outs mentioned above, you certainly can accomplish the goal of managing risk and selling loans without real-time data.
Heck, the secondary markets existed, and functioned well, years before there was even reasonable market transparency. A good friend of mine told me a story once about a secondary marketing conference during the Black Friday event of the late 1980’s where once news of the dramatic market movement of that day made its way to the ski resort where they were no doubt deliberating on some serious mortgage issues, everyone went scrambling to the bank of pay phones to get in touch with someone who could figure out their position and adjust their coverage. Did people lose money on that day? No doubt. However, they all were playing by the same rules and were under the same technological constraints.
The good news is that technology and market transparency both have improved significantly since that time. Those improvements have reduced greatly the nasty consequences that result from such technological and transparency deficiencies. And we will continue to see even more improvements which, in turn, will further minimize market inefficiencies and their consequent arbitrage opportunities.
The point is that if a technological innovation is available and that innovation will allow you to have more current information at the point of decision, why not take advantage of it? If real-time data is not necessary, then the question becomes how stale is too stale. Is it ok if your eligibility information is 24 hours old? 1 week old? More? How about pricing data? Is data from one hour ago stale? One day ago? Greater?
So I ask you, if real-time data is available to you when you are making a decision to adjust your position or to commit a certain loan or group of loans, why wouldn’t you use it?
Join the discussion here.
Managing Director, Secondary Services
Optimal Blue, LLC