SIA Technology Management Conference
Sell Side Pours Dollars Into Capacity, Connectivity | Market Data Needed--And Faster, Please | Hedge Fund Asset-Class Demands Raise Stakes for Servicers | SIA, BMA Quiet About Merger; Some Open Questions Remain | Matching People and Technology | Elsewhere in Town: Thain, Nazareth at the Big Board's Regulatory Show | Business Is Looking Up, Vendors Act Accordingly | Sybase: Can Breadth Trump Specialization? | Platform's Latest Version Goes Real-Time | Intel: Wanting to Be Noticed--Up to a Point | Smart Searches Find Their Way to Wall Street | Asset Manager Ixis Using Pyxis' mWholesaler | Vendors Combine Real-Time and Historical Analytics | Bracing for MiFID
Market Data Needed--And Faster, Please
June 19, 2006
The huge growth in proprietary trading might never have happened without recent advances in low-latency market data feeds for the latest generation of electronic trading platforms, whether in cash equities or in the other asset classes that are ever more attractive to traders and investors seeking superior returns. With e-trading increasingly the norm, volumes and data rates are soaring, and the demands for market data are changing.
"Increasing levels of data are driving traders to look at things differently, more creatively," says Brad Bailey, senior analyst with Boston-based research firm Aite Group. "They're looking at new trading opportunities and using new models."
Louise Westerlind, an analyst in the institutional securities and investments group at Boston-based Celent, notes: "Volumes of market data have increased in part due to electronic trading. [The Securities and Exchange Commission's] Regulation NMS, decimal pricing and algorithmic trading have all contributed to higher trading volumes. Simply put, more trading means more data."
As recently as three years ago, an equities trader on a firm's proprietary desk would have relied on a couple of screens from market data consolidators such as Bloomberg and Reuters Group, plus one or two others for electronic trading platforms. Today, that same trader will have seven or eight screens showing multiple markets, with analytical tools.
"The rate of change has increased over the last two years and will increase more over the next two," says Jack Gidding, VP of customer propositions for the Reuters information management services unit in New York. "Direct exchange feeds provide low-latency exchange information, but they still need other content, like news."
Westerlind says: "The focus for market data is speed. Financial institutions are searching for alternatives to consolidated market data vendors in order to reduce the market-data latency. But when the race to achieve the fastest speed has been won, the next step will be to compete on enhanced trading products and services."
One big issue has been the need to manage the underlying market data and still accommodate very low-latency feeds for direct-market access (DMA) and algorithmic trading. Bloomberg's answer was B-Pipe, its first stand-alone data feed that allows users to link to non-Bloomberg applications. Earlier this year, Reuters tweaked its Reuters Market Data System (RMDS) to ensure submillisecond latency. RMDS is attracting former devotees to legacy distribution systems such as Triarch and TIB because RMDS now offers this submillisecond latency, says Gidding.
"Over the last two years, DMA has been the trend, and this is continuing to accelerate," adds Gidding. Without low latency, algorithmic strategies and DMA simply couldn't be done. "Customers are looking to take opportunities in milliseconds, and they need more automation," he says.
In recent years, a number of suppliers have come out with event processing systems to help traders digest the flow of data. The field is about to get a new entry: Coral8 of Mountain View, Calif. will be making an appearance at this week's Securities Industry Association technology conference in New York in advance of its emergence from "stealth mode" on June 26.
