As a child, one of my friends had a sandbox in his garden. At first, this was a pristine environment, where all the kids longed to play, and would share their toys, digging and frolicking in the sand, basically experimenting with new textures and activities. But over time, the novelty soured as kids focused on their favorite toys, as parents withdrew their children because of other kids’ (lack of) personal hygiene, and eventually the remaining toys became rusty, weeds overgrew the sand, and the neighbor’s cat began using it as a king-size litter box.
In the data world, a sandbox represents pretty much that same philosophy—call it experimentation through plug-and-play—with organizations creating environments designed to nurture innovation, where developers have access to everything they need to create next-generation data services, from easily accessible datasets to connectivity and hosting, all generally at preferential rates or entirely free of charge.
Then there are also initiatives like the aptly-named FinTech Sandbox or New York Fintech Innovation Lab, which offer a formal program of subsidized services and structured mentoring by experienced fintech executives. For example, web services data provider Xignite is providing APIs for accessing market data free of charge to nine FinTech Sandbox participant startups, three of which demonstrated solutions leveraging Xignite’s data at last week’s FinTech Sandbox Demo Day.
“A lot of developers coming out of school don’t really know the financial industry, and data is expensive. So the idea [of sandbox initiatives] is to reduce friction and provide data and so on free of charge for six months for testing,” says Dinesh Chheda, advisory board member and data executive in residence at FinTech Sandbox.
But sandboxes aren’t just for complete newcomers: Swedish market data vendor Millistream has launched its Millistream Sandbox, a test environment that allows clients to experiment with delayed data from its products in an unashamed attempt to get them “hooked” on Millistream’s data and delivery mechanisms. Because Millistream does not require Sandbox users to sign contracts, users are not restricted to how they can use the data within the broad condition that it be used for testing purposes, or for how long they must subscribe. So if the client tests something that doesn’t work out, they can move on and try out something else without having to continue paying for something they no longer use.
The participation of vendors and founder sponsors who are willing to subsidize—or eat entirely—the cost of market data is key, because it legitimizes the model of free or affordable tiers of data delivery, and points the way to a more flexible model for data licensing; and importantly, flexible yet standardized, so that it ultimately becomes easier to gain buy-in for new models from across the industry.
More often than not, exchanges are cast as the bad guys of data licensing and fees. However, some exchanges like Deutsche Börse are already taking it on themselves to support the next wave of financial technology and data newcomers, using their extensive infrastructures and datacenters to host and support startups with limited resources, and to help them connect—both in terms of data connectivity and from a business partner perspective—with other data sources and service providers.
The enormity of the task facing financial firms to not just update their infrastructures and applications, but implement the requisite architecture to support true Data-as-a-Service delivery means that, as Chheda says, firms will need to enlist those innovative startups—in which case, the spirit of innovation and the fee tiers that support it may become more pervasive, more standardized, more accepted, and more common across other areas of business, perhaps ultimately enabling truly open, plug-and-play and pay-as-you-go data platforms, which is what consumers have been requesting for a long time.
The founder and CEO of Imperative Execution looks at how trade execution is changing and what that means for the buy side.Subscribe to Weekly Wrap emails