Bloomberg is planning to shorten the default data retention period for which communications data will be accessible via its Terminal and messaging platforms to two years, frustrating some clients that will now need to change their data arrangements and absorb new costs to meet minimum legal and regulatory data retention requirements. Previously, Bloomberg has provided access to five years’ worth of data to subscribers of these services.

In an email sent to customers on March 15, which WatersTechnology has seen, Bloomberg writes that from July 15, 2021, communications data “will be retained and accessible for only two years via the Bloomberg Vault Terminal Search (BVTS) function or other Bloomberg Vault Core Compliance Tools (BVCC).” Communications data created after July 15 that is more than two years old will be deleted from the vendor’s systems unless a client subscribes to its Vault Premium service.

Buy- and sell-side firms are required by the UK’s Financial Conduct Authority (FCA), the Monetary Authority of Singapore, and European regulators via the second Markets in Financial Instruments Directive to retain records of their electronic communications for a minimum of five years, rising to seven years if requested by some EU national competent authorities. Some firms also retain communications data for several years to meet internal legal and governance obligations.

Bloomberg’s policy update means buy-side chief operating and compliance officers must decide whether to subscribe to the Vault Premium service, use a third-party data retention solution, or store and manage their communications data internally.  

It’s caused quite a bit of consternation in the COO and CCO world. We have a five-year record-keeping obligation for the Financial Conduct Authority, and Bloomberg is now saying they’re only keeping it for two years.

Head of compliance at a European asset manager

“It’s caused quite a bit of consternation in the COO and CCO world,” says a head of compliance at a European asset manager with more than $5 billion under management. “We have a five-year record-keeping obligation for the Financial Conduct Authority, and Bloomberg is now saying they’re only keeping it for two years. They may be offering to keep it for five years for an additional fee, but a lot of firms are scrambling around saying, ‘We’ve been relying on Bloomberg chat messaging, and now they are giving us less than what the FCA expects.’”

Bloomberg’s email goes on to say, “If your firm has a data retention requirement beyond two years, please contact your Bloomberg representative to discuss options.” The compliance head says this is disingenuous because Bloomberg is aware that “everyone has a retention period of more than two years.”

However, Nader Shwayhat, global head of Bloomberg Vault compliance solutions, says the vendor doesn’t know what proportion of its clients will be impacted by the policy changes or how many will not require a minimum of five years’ data retention. He says it is up to the customer to know their own regulatory obligations. 

“They have to know, and we’re talking about firms global in scope. It’s not as simple as ‘the buy side’—the buy side is segmented in many different ways, and their jurisdictions all depend on their local registration and the local government upon which they are mandated and governed, if at all. There are many firms that do not fit the profile of a typical hedge fund,” Shwayhat says.

With the policy update due to take effect in just three months—though firms won’t technically be impacted for two years—Bloomberg customers, subject to the changes, face three options, each of which comes with a price tag: subscribe to Bloomberg’s Vault Premium solution, where pricing begins at $1,000 a month; opt to take data out of the non-premium Bloomberg Vault, where charges start at $50 per gigabyte extracted subject to a minimum $3,000 per extraction; or sign up to a compliance service where transcripts of communications data are delivered daily via FTP for customer download, which will require the purchase of new data storage or a third-party data retention solution. 

While the Vault Premium package costs a minimum of $1,000 per month, Shwayhat says the total price will vary depending on factors such as surveillance requirements (that is, trade reconstruction capabilities), the data retention period (ranging from three years to indefinitely), and the types of datasets stored. For example, in addition to Bloomberg communications, clients may ask the vendor to store their Twitter, Slack, or Microsoft Outlook communications, as well as phone call recordings or trade data.

A matter of communication

Shwayhat says Bloomberg has spent the past several weeks carrying out phone inquiries and outreach campaigns to clarify which clients will be impacted by the changes, and if so, how.

He says firms will not feel the effects of the changes until two years after the policy update. Data captured from July 15 onwards will be available via the Bloomberg Terminal, messaging platform, and monitoring systems for two years. From July 15, 2021, any communications data created after that date and older than two years will be deleted, and will no longer be available in Bloomberg systems unless the client is subscribed to Vault Premium. Data captured up until July 14 this year, however, will remain subject to the old policy agreement and will be stored for five years.

Shwayhat says firms that already subscribe to Vault Premium, third-party services that archive communications, or the daily Bloomberg FTP file service will be unaffected.

But there is a cohort of firms that have relied on Bloomberg to store communications data within the Terminal or other Vault compliance and administrative systems for the five-year retention period to meet legal and regulatory obligations, says the head of compliance at the Europe-based asset manager. They say that multiple CCOs and COOs have been airing their frustrations to one another in mailing groups since the March announcement.

One CIO at a tier-two European asset manager, and a head of compliance at a European asset manager with more than $15 billion under management, spoken to for this article, say they are still trying to figure out how they will be affected.

Bloomberg says it is not cutting the amount of storage available but is reducing the amount of “courtesy storage” that has until now been included in the price of its platforms. It is understood internally within Bloomberg that there is still work to be done in order to better communicate the policy changes to clients, as well as to make clear distinctions between the Vault compliance tools referenced in the email, the courtesy data storage, and Vault Premium. 

When asked how clients have responded to the policy changes, Shwayhat says, “Customers that already have those [data retention systems] are not impacted and they just had a lot of clarifying questions to confirm that. But customers that do not have an existing data retention solution, their response has been muted.”

On March 24, Bloomberg sent a second email to clients clarifying that if they are a user of Vault Premium they will not be impacted by the changes. 

Bloomberg could not provide the proportion of firms that have so far decided to subscribe to Vault Premium, pay to extract their data, or opt to receive a daily compliance file.

Déjà vu

Policy updates such as this one are not entirely new to Bloomberg or its customers. In 2010, the vendor sent clients a similar email informing them that its retention policy was changing from infinite storage to five years, and that any firm wishing to store its communications data for longer than five years would have to subscribe to its Vault service. One former Bloomberg Vault employee says hundreds of new customers signed up to avoid the burden of organizing and storing the data themselves.

“It’s a giant, expensive pain in the butt to take a USB drive with 10 million messages,” says the former employee. “Because when you download it, you’re going to have to account and check that what’s on the USB is fully in your system and your IT people will have to immediately take care of searching and re-indexing it. It’s a whole IT headache.”

They say transferring this amount of data to internal systems is a massive operation that can take months to ingest, format, make searchable, and reconcile with communications metadata. In addition, firms will have to retrieve the stored data from Bloomberg, develop the functions to query it, and absorb the cost of extracting it in large volumes from Bloomberg systems.

This is all part of a review process we go through to keep up with the evolution of the industry, the regulatory landscape, and the explosion of data volumes, storage, and requirements over time,” they says. “As you can imagine, data in 2020 is not the same as data in 2010.

Nader Shwayhat, Bloomberg

Others agree that data extraction is becoming an increasingly challenging option to contemplate. 

“The current price begins at $50 per gigabyte to extract the data, with a minimum of $3,000 per extraction. We’re talking gigabytes, but the world is in terabytes and petabytes these days, so that can be punitive unto itself,” says a senior executive at a regulatory reporting vendor. “You’re suddenly in a world where you have to pay a massive premium to store [data] to meet your obligations, and you’re going to have to pay a massive premium to get it out. You’re stuck.”

The head of compliance says the company has been downloading copies of its communications data from Bloomberg for several years. While this is a challenging compliance strategy that involves a lot of technical lift, he says it wanted to prevent a situation where it was “completely beholden to Bloomberg” for the data, and to avoid being caught out by any future policy changes that could result in unexpected costs.  

A Bloomberg spokesperson says clients can, at no additional cost, use the core compliance tools provided as part of their Terminal subscription to search and self-extract data at any time. They say that records can also be downloaded via the daily FTP download. However, if a client wishes to extract large volumes of multi-year data from Bloomberg systems, there is also a paid extraction option. 

“If a client would prefer to have Bloomberg perform an extraction on their behalf, we do charge for this service, at what we understand to be a competitive rate,” the spokesperson adds.

Shwayhat says the policy review is a response to the increased amount of data that has been generated over the past 10 years, which has meant that systems required to manage it have had to keep pace.

“This is all part of a review process we go through to keep up with the evolution of the industry, the regulatory landscape, and the explosion of data volumes, storage, and requirements over time,” he says. “As you can imagine, data in 2020 is not the same as data in 2010.”