Opening Cross: Raising the ‘Standard’ in Terms of Cooperation


So, the industry may soon have a new standard protocol for market data distribution: and not simply a de facto standard co-opted based on existing uptake, but one specifically designed for market data needs that albeit incorporates the speed and bandwidth efficiencies of one such protocol—Nasdaq’s much-imitated ITCH protocol—into the FIX Protocol, a truly industry-driven standard that has been created and evolved over more than a decade with cooperation from participants on all sides of the capital markets.

The most-touted benefits of a market data standard are the potential savings for end-user firms, by eliminating the need for them to build and maintain interfaces to different market venues. However, standards also benefit venues themselves, reducing the need to invest in proprietary technologies, lowering the risk of mis-communication between market participants, and enabling far-flung emerging markets to offer access to their services via the same protocols used by their more established counterparts.

It’s ultimately this promise of a win-win for all parties that makes everyone keen to cooperate on standards, despite the pro bono time and investment involved. But there’s still also some cajoling required to ensure takeup. For example, whereas FIX Trading Community targeted its previous data standard, FAST (FIX Adapted for Streaming), at exchanges, FIX intends to start by promoting the standard initially to end users, and as momentum builds among this segment of the community, others will be incentivized to follow.

While the new standard does not simply fold ITCH into FIX—which those involved deemed an unsuitable compromise because of some of ITCH’s shortcomings—it does draw on some of its components, and even though Nasdaq is not currently directly involved in the initiative, its success will depend on an implicit spirit of cooperation from the exchange group to not assert any claims to its intellectual property. To be fair to Nasdaq, there’s no evidence that the exchange would crack down on the use of ITCH or the plethora of ITCH-like standards adopted by other exchanges—after all, ITCH’s widespread adoption and familiarity benefits Nasdaq as well—though some might be nervous, considering recent purchase eSpeed’s litigious history surrounding its Wagner Patent governing electronic futures trading, and considering that FAST’s adoption was ended by a (ultimately dismissed) lawsuit. And if there’s one lesson to be learned from the FAST lawsuit, it’s that the spirit of cooperation needs to continue even in the face of legal action, with participants presenting a united front, rather than backing away for fear of being sued.

Also in the spirit of cooperation, Canadian advisory firm Collaborative Financial Services Inc (CFSI) is gaining momentum towards its goal of providing solutions that incorporate services from multiple vendors with whom it works as a sales agent, representing companies seeking to enter or expand their presence in Canada. In the past week, the company has announced deals to represent Market Data Authority (MDA), a startup provider of execution performance and transaction cost analysis, and managed IT services provider Quartet Service. While CFSI will act as a sales agent for both to grow their business, Quartet will also help CFSI grow its own business, by providing managed infrastructure and hosting to support its longer-term aim of creating high-performance monitoring solutions. In addition, the initiative is already making good on cross-leveraging clients’ services within an ecosystem of providers. MDA already uses market data from Activ Financial, which enlisted CFSI to grow its presence in Canada, while Quartet can provide managed hosting in datacenters where Activ has a point of presence for access to Canadian exchange TMX Group.

Perhaps key to these and other initiatives is the realization that the capital markets and financial data industries are part of an intertwined community, and that any community works better when its participants work together.

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