January 2019: On the Origin of SIP Feeds

Evolution takes different forms within capital markets.

Jamie Hyman 2017

“I think it inevitably follows, that as new species in the course of time are formed through natural selection, others will become rarer and rarer, and finally extinct. The forms which stand in closest competition with those undergoing modification and improvement will naturally suffer most.”

Now, when Charles Darwin outlined key tenets of evolutionary theory in his foundational work, On the Origin of Species, he probably wasn’t thinking about gripes over market data fees. And while I am certainly not the first to draw parallels between evolution and economics—metaphors linking capitalism and survival of the fittest abound—Darwin’s theory is foundational because natural selection is a reliably solid visualization tool when mulling competition and capital markets.

Max Bowie cuts straight to the evolutionary core in his examination of the current framework for market data fees in the US: namely, how the traditional setup where SIP feeds consolidate data from all US exchanges can no longer thrive in an ecosystem where market data fees are on the rise. 

Anthony Malakian, James Rundle and Wei-Shen Wong build upon the evolve-or-die concept with their analysis of Members Exchange (MEMX). In order to survive, the new exchange’s founding members—some of the biggest names in US equity markets that happen to be in competition with each other—will have to commit to radical collaboration. If they can pull it off, MEMX’s payoff could be historic, finally shaking up an environment that allows data fees to swell with limited recourse.

In her feature covering the major initiatives afoot to evolve corporate reporting of ESG factors, Kirsten Hyde looks at evolution from a different perspective, arguing that standardization of data is an essential component in improving ESG factor disclosure. While interest groups appear aligned on this, like most evolutionary progress, it will take some time.

After all, Darwin revised On the Origin of Species for two decades before publication. 

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