Asia-Pacific Financial Information Conference: Panel Debates Direct Connects, Agreements

Firms are increasingly working directly with data sources—especially as those sources roll out new feeds that require new usage policies—but sometimes still find vendors playing important roles around billing and administration, according to an FISD panel at last week’s conference.

“Latency is one of the most important reasons for [going direct to source]. We are bringing our trading system latency down from over 100 milliseconds to single-digit milliseconds—and with this, we think we will get more direct connections,” said Daniel Poon, vice president of market data at Hong Kong Exchanges and Clearing.

“In the interdealer space, it may be latency-effective to get a direct feed from a broker, it might be easier to use, negotiate and control, and you can get a high degree of granularity with a direct relationship. It may also enable cost savings… for participants who only look at broker data, because you can use a lower-cost technology and remove [premium] terminals,” said Andrew Miller, CEO of Arcontech.

“If you are just looking at specific data, such as broker data, then yes, it makes sense to go direct,” said Jutta Werner, head of content acquisition for Asia at Thomson Reuters. However, she added that this mostly applies to high-frequency traders seeking access to a small group of highly liquid markets, of which there are few in Asia, and that the cost of going direct can be high, whereas vendors offer lower TCO and faster time to market. In addition, some exchanges are instituting direct policy agreements when rolling out new policies, such as non-display fees, she said.

For example, HKEx plans to launch a non-display policy, Poon said, and is trying to make the policy simple since other exchanges have differing policies.

“We get involved in… looking at hundreds of data sources and trying to resolve issues around billing,” said Ben Mendoza, chief executive of MDSL. “The old model of just declaring numbers of users doesn’t make sense anymore.”