Market Data – Opportunities, Complexity and Challenges
Whether it’s high frequency, quantitative or event-driven trading, a common denominator – across all asset classes and geographic markets – is a need for comprehensive and reliable market data on which to trade. In general, and especially for trading styles including HFT, arbitrage and market making, delivery of that market data needs to be at the lowest latency possible.
Indeed, market data is so fundamental to trading, that most firms dedicate a team of specialists to manage it. These teams are tasked with delivering the market data required to implement strategies, which need to be deployed quickly and are subject to change. In particular, these teams need to provide a number of services and address a number of key issues:
• Selection of market data, determining which data feeds — both direct from execution venues, and via aggregators (consolidated feeds) have appropriate coverage in terms of instruments and data fields provided.
• Determination of whether direct/raw or aggregated (and compressed) feeds are best for purpose, based on latency requirements and cost. While direct feeds are lower latency, they can be more expensive, so ROI needs to be considered.
• Deployment of connectivity to market data sources (as well as trade execution interfaces) to ensure appropriate latency, capacity and reliability.
• Configuration of network routers and switches, firewalls, network interface cards, server ports and data feed handler software to deliver data to trading applications is complex and time consuming.
• Ongoing monitoring of data feeds for latency and jitter is required to ensure optimal execution of trading algorithms. This includes latency between the source of feeds and a firm’s data center, and also within a data center.
• Storage of trade and quote data over an extended time can be a requirement in order to comply with regulatory edicts for best execution and also to perform transaction cost analysis to improve the profitability of trading.
The management of market data, then, is a complex activity, and one that requires continuous, faultless execution in order to underpin the business of automated trading.
Market Access Platform
EXCEtech enables clients to leverage its ultra-low latency market data delivery networks and high-performance trading infrastructure for market access and data distribution from leading exchanges.
Figure 1: The Technology of Market Access
A technical overview of Market Access:
• Exchanges’ matching engines interface with trading firms via communication ports that transmit market data and receive orders/executions.
• Two ultra, high-speed switches are connected to primary and backup 10gE network ports to multiple HFT connections.
• Voluminous market data is distributed as an easily accessible multicast stream. Thus, all recipients receive the same data at the same time.
• Order/execution channels are multiplexed back to the matching engine network ports.
• Proactive, continuous monitoring of all traffic ensures networks are not overloaded and there are no dropped packets or serialization delays.
• Capacity is managed on an ongoing proactive basis to maintain required performance standards.