Monday, November 19, 2018 Stamford, CT USA — A new Greenwich Associates report finds market participants spending more than ever on market data as they balance the relative merits of consolidated versus proprietary market data by weighing the importance of the speed, depth and accuracy of the information provided.
The report, based on a recent research study, finds that market participants (including broker-dealers, hedge funds, market makers, and data distributors) are increasingly reliant on exchange data and are largely satisfied with the quality and reliability they receive. Only 26% disagree with the idea that exchanges do a good job of managing their technology.
Market participants were also asked to differentiate between consolidated data feeds and the proprietary data feeds that come directly from exchanges. Forty-eight percent identified speed as their primary reason for taking direct exchange feeds, finding direct data to be faster than consolidated data. Other reasons given for purchasing proprietary information include lower cost (14%), greater reliability (10%), greater accuracy (7%), and finding direct data more comprehensive (3%).
Skepticism of the SIPs surfaced when market participants were asked if they would trade with an electronic broker whose algorithms used only the consolidated feeds to guide routing decisions. While only 2% of industry professionals said they would, a further 34% of respondents said they would if there was greater regulatory clarity that ensured best-execution requirements were being met. Only 25% of respondents dismissed outright the idea of using a SIP-only electronic broker.
“Despite escalating tensions, our study suggests a possible path forward for the exchanges, with the industry clearly identifying a role for regulators to play,” said Brad Tingley, Market Structure and Technology Analyst at Greenwich Associates and co-author of the new report, Nice to Have vs. Need to Have: A Look at Proprietary Exchange Feeds and SIPs. “With greater clarity regarding consolidated feeds and their ability to be used to deliver best execution, we could see a truce develop. In other words, we expect to see a market where enhanced data is available for a fee but is not required to remain competitive and in compliance.”