April 2014 - sponsored by: S&P Capital IQ
Consolidated Feeds Demand a Second Look
At first glance, the current hullabaloo over high-frequency trading might lead one to think that consolidated feeds are a thing of the past, and the only type of datafeed that matters is ultra-low-latency direct exchange feeds. But while these are important, you'd be wrong: in many ways, as the volume of data continues to grow, the case for consolidated feeds is arguably greater than ever for the majority of market participants.
This is because while every trader cares about being fast, only a sub-set of these make their living from being the absolute fastest. Progressive reductions in latency have left relatively slim pickings at the cutting edge for those willing to compete, while the cost of achieving those reductions has become incrementally more expensive, leaving only a few with the inclination or budget to make heavy investments in latency. For many, more important than being fast is being stable under heavy volumes, and more important than speed-as described by S&P Capital IQ's Pierre Feligioni in an article in this report-is the ability to be smart about data.
So at first glance, MB Trading-whose chief technology officer William Floyd is featured in this report's virtual roundtable-might seem the antithesis of this, since the firm has abandoned consolidated feeds in favor of direct connections to exchanges and proprietary infrastructure in co-location centers. However, while this setup suits the firm's current requirements-for low-latency access to a small number of trading venues in one regional market-it would not be practical should the firm change its trading style and suddenly require feeds from more venues or international markets, and MB Trading refers clients to consolidated feed providers when they want data on markets not covered by the firm.
Even Aite Group senior analyst David B. Weiss, who emphasizes the importance of third-party data centers to delivering affordable, low-latency access to local and international markets, acknowledges that as markets become more fragmented, demand for-and access to new datasets via-consolidated feeds will increase.
But ultimately, as long as cost remains an issue for consumer firms, as S&P Capital IQ's Brian Cassin says, "finding the ideal mix of direct and consolidated feeds is really dependent on the unique needs of the firm." Or to put it another way, firms must fully understand what business they aim to be in before they can hope to understand what will work for them.
Bill Murphy, CTO of Blackstone, once again joins the podcast to discuss the private equity firm's new offices, designed to house its innovations team.Subscribe to Weekly Wrap emails