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Trading Technology

05:14 PM
Tina Whitney
Tina Whitney
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The Need for Speed: Market Data Vendors Ramp Up Offerings

In today's electronic-trading environment, firms are in need of data that can be acted upon quickly and even fed into algorithms and analytical decision engines for fast, accurate responses.

As the securities industry continues to deal with ever-increasing amounts of market data, vendors are adapting with newer technologies to address the needs of end-users. In today's electronic-trading environment, firms are in need of data that can be acted upon quickly and even fed into algorithms and analytical decision engines for fast, accurate responses.

"What's happening in the data space is that electronic trading and algorithmic trading are changing the way market data is being used and the way people approach the data space," says Larry Tabb, founder and chief executive officer of The Tabb Group. He explains that traditionally, data would come to a screen; it would be looked at; a decision would be made; and then the decision would be acted upon. But with the movement to electronic-trading environments, by the time you act on data, it's often already out of date, Tabb explains.

While perusing the market-data vendor offerings on the floor, one SIA show attendee who works in software development for a large financial institution and requested anonymity, agrees that the time between the input and output of market data is increasingly tighter. And, with the huge amounts of data to be analyzed, it's vitally important that the data come in and can be used faster than ever, he says. He was therefore on the lookout for something different, something that "catches my eye," he says, adding that while the market has been stagnant over the past few years, vendors now seem to be coming out with newer, different offerings -- like the type that he is on the lookout for.

Tabb explains that some of these new and different offerings in the vendor area are focusing on speed and the analytical decision engines that sit on top of the market data and make the purchasing decisions. The electronic engines can react much more quickly and the issue has become, How do you speed up that process of getting the data? "If you can see that the price of a stock is in your favor and can react faster than the next guy, you can buy or sell before the next guy can get there," says Tabb.

"Traditional market-data vendors have a history of providing large feeds for complex sets of products, adding news and providing an aggregated view of what's happening. But now, with electronic trading, people are looking for more direct feeds from the exchanges," he continues. Two vendors in the direct-feed, or feed-handling, space include Wombat Consulting and HyperFeed Technologies, and even Reuters says it's in the process of developing its own direct exchange feeds, notes Tabb.

Another important element of the market-data evolution revolves around tick data, the tick-by-tick, stock-by-stock data necessary in algorithmic trading or analytics. One vendor working to capture this space is VhaYu Technologies, which enables the quick capture, storage and analysis of massive quantities of data, Tabb says.

Masashi Sato, a systems analyst at Nomura Securities International, which is a VhaYu customer, explains that the vendor provides real-time tick data, which can then be used in Nomura's volume weighted average price (VWAP) trading. "We were using a proprietary system for gathering the tick data, but the quality of the data is not very good and we wanted faster, more accurate data," says Sato. "Tick data is a lot of data and it is hard to verify the accuracy," he adds. In general, Sato says that tick data is becoming more and more important in the trading industry as intra-day trading performance is becoming a priority.

Tom Garske, VP of market data at Merrill Lynch, agrees that tick data is becoming more important to firms as the volume is increasing. In addition, Garske says that in general, firms are still downsizing their market-data vendor relationships and focusing more on strategic partnerships with their select vendors. He says that another area that firms are focusing on is the non-real-time data area, such as research and fundamental data. "There has been tremendous spend in the non-real-time area, but it has been loosely managed. Going forward, it's important to focus more on this area and maybe streamline the spend -- find areas of overbuying."

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