Make money from your market data

http://www.btresourcesnewsletter.com/december09/marketData.aspx

We investigate whether consolidating market data distribution channels can reduce cost while improving market performance

When looking at reducing your market data costs through better vendor management, don’t forget to look at the underlying infrastructure.

With the majority of trades across all major markets now originating from fully-automated trading systems, and with Complex Event Processing (CEP) and Algorithmic trading applications implementing ever-more complex trading strategies, the mission criticality of low-latency, high-quality market data is increasing all the time.

As new trading venues such as dark pools and Multilateral Trading Facilities (MTFs) open to compete with exchanges, and with more and more trading taking place in emerging markets, firms are facing increasingly complex market data requirements. To fulfil this demand for data, most firms have to access a diverse portfolio of sources, ranging from direct exchange feeds and the “big two” market data providers to smaller specialist vendors. This has led to many firms signing multiple contracts and subscriptions with multiple vendors. Although this in itself is arguably good practice, it does invite inefficiency and makes accurate analysis of market data costs very difficult. Most firms have implemented some form of in-house market data management to identify cost inefficiencies within their procurement and realize savings accordingly, with varying degrees of success.

Multiple vendor networks add risk

Many market data sources tend to sell their own connectivity services for data delivery, claiming reduced latency and higher availability. This then requires the user to implement new connectivity to yet another external network. Therefore, over time, a firm’s market data infrastructure tends to become more complex as each new source is deployed.

This makes it increasingly difficult to build a holistic view of a company’s overall network infrastructure. Typically a firm’s network topology and strategy will go into great detail regarding its internal network, but will tend to be very light on detail when it comes to externals “clouds”. Lack of visibility of total infrastructure and the consequent dependencies is never good for business planning purposes.

Most market data providers delivering their data in any one country purchase their network connectivity from the same group of network vendors. Those network vendors are likely to use conventional infrastructure with the potential for common and hidden points of failure between vendors. Failure, in this context, could range from network breakdown to the less obvious problem of increased latency due to unusual patterns of network traffic. An effective way to mitigate against this risk would be to look at migrating collection and distribution of market data to a single network vendor, while still sourcing the data from a range of data sources.

Complex connectivity creates cost

Consolidating market data network connectivity can provide significant cost savings, both in terms of reduced connectivity charges and lower service costs.

Some leased lines connecting a firm’s core network to third-party networks are no longer required and can be removed, thereby reducing monthly network connection fees. Moreover the edge infrastructure of routers and switches that supported the connections can also be removed, simplifying network management, reducing rack space requirements, power and cooling costs. As a side effect of this simplification, latency may also be reduced.

Conclusion

In the current business climate, firms are firmly focused on cutting costs and reducing inefficiencies. By consolidating market data distribution with a single low-latency network provider firms can cut costs, while at the same time maintaining a well-managed portfolio of market data vendors. These changes can have the added benefit of improving the manageability of a firm’s infrastructure thereby reducing risk of failure, even improving performance.

Learn more about some of the 400 organisations that use the BT Radianz Shared Market Infrastructure to distribute financial applications and services to more than 14,000 financial industry customer locations.

We investigate whether consolidating market data distribution channels can reduce cost while improving market performance?
When looking at reducing your market data costs through better vendor management, don’t forget to look at the underlying infrastructure.
With the majority of trades across all major markets now originating from fully-automated trading systems, and with Complex Event Processing (CEP) and Algorithmic trading applications implementing ever-more complex trading strategies, the mission criticality of low-latency, high-quality market data is increasing all the time.
As new trading venues such as dark pools and Multilateral Trading Facilities (MTFs) open to compete with exchanges, and with more and more trading taking place in emerging markets, firms are facing increasingly complex market data requirements. To fulfil this demand for data, most firms have to access a diverse portfolio of sources, ranging from direct exchange feeds and the “big two” market data providers to smaller specialist vendors. This has led to many firms signing multiple contracts and subscriptions with multiple vendors. Although this in itself is arguably good practice, it does invite inefficiency and makes accurate analysis of market data costs very difficult. Most firms have implemented some form of in-house market data management to identify cost inefficiencies within their procurement and realize savings accordingly, with varying degrees of success.
Multiple vendor networks add risk
Many market data sources tend to sell their own connectivity services for data delivery, claiming reduced latency and higher availability. This then requires the user to implement new connectivity to yet another external network. Therefore, over time, a firm’s market data infrastructure tends to become more complex as each new source is deployed.
This makes it increasingly difficult to build a holistic view of a company’s overall network infrastructure. Typically a firm’s network topology and strategy will go into great detail regarding its internal network, but will tend to be very light on detail when it comes to externals “clouds”. Lack of visibility of total infrastructure and the consequent dependencies is never good for business planning purposes.
Most market data providers delivering their data in any one country purchase their network connectivity from the same group of network vendors. Those network vendors are likely to use conventional infrastructure with the potential for common and hidden points of failure between vendors. Failure, in this context, could range from network breakdown to the less obvious problem of increased latency due to unusual patterns of network traffic. An effective way to mitigate against this risk would be to look at migrating collection and distribution of market data to a single network vendor, while still sourcing the data from a range of data sources.
Complex connectivity creates cost
Consolidating market data network connectivity can provide significant cost savings, both in terms of reduced connectivity charges and lower service costs.
Some leased lines connecting a firm’s core network to third-party networks are no longer required and can be removed, thereby reducing monthly network connection fees. Moreover the edge infrastructure of routers and switches that supported the connections can also be removed, simplifying network management, reducing rack space requirements, power and cooling costs. As a side effect of this simplification, latency may also be reduced.
Conclusion
In the current business climate, firms are firmly focused on cutting costs and reducing inefficiencies. By consolidating market data distribution with a single low-latency network provider firms can cut costs, while at the same time maintaining a well-managed portfolio of market data vendors. These changes can have the added benefit of improving the manageability of a firm’s infrastructure thereby reducing risk of failure, even improving performance.
Learn more about some of the 400 organisations that use the BT Radianz Shared Market Infrastructure to distribute financial applications and services to more than 14,000 financial industry customer locations.