Opening Cross: Data’s State of the Union: More Torture Ahead?

Today’s market data professionals must feel like victims of the medieval practice of quartering, where a persons limbs were tied to four strong horses, all pulling in different directions. On the one hand (or leg), ensuring the lowest latency in a highly competitive environment is an expensive proposition, but an absolute necessity for today’s automated trading desks, and the projects being undertaken by exchanges and vendors described in this issue reflect intense demand among trading firms.

For example, BATS Global Markets is making more granular statistics for data and order-routing latency for its exchanges available to members, who are hungry for any information that can help them improve their own latency or better target their trading strategies (see story, page 1), while Hudson Fiber Network has connected network hubs between various datacenters in the New York and Toronto area, creating a series of “Fast Paths” between traders on both markets (see story, page 6).

Meanwhile, the Chicago Board Options Exchange has rolled out latency monitoring technology from Dublin-based Corvil to optimize the exchange’s market data infrastructure by measuring bit and message rates for its multicast datafeeds, to ensure no data is “dropped” during delivery.

And although growth rates for the OPRA US options feed will decline next year, overall data volumes will still increase (see story, page 1). And even though commodity hardware processing solutions and cheaper bandwidth costs are making this easier for firms to address, capacity—latency’s evil twin—is still an expensive battle.

But on the other hand, data groups are often still being expected to do more with less in many cases—smaller budgets, less in terms of compensation, less support and fewer staff—and the danger is that this will leave firms less competitive or more vulnerable to key man risk when their execs move on.

However, this environment can’t persist forever. In his State of the Union address last week, US President Barack Obama issued a call for investment to drive innovation that will allow the US compete with other nations around the globe that are rivaling or surpassing the US in their technology and productivity.

Also last week, at an event hosted by Dow Jones, senior bank economists predicted that the financial markets have completed the first phase of recovery and are now beginning the long, hard slog towards regaining full health. This—together with Obama’s call for innovation—will hopefully beget a rising market that lifts the global economy overall, and in particular those that suffered worst following the credit crunch and ensuing financial crisis.

But while Obama cited South Korea and China as examples of countries that are performing well, the latest China Business Survey from Market News International sounds a note of caution: Though its index of overall business conditions for Chinese-listed companies is still positive, it fell for the fourth month in a row, and credit availability tightened over the same period. According to MNI, its index measuring credit availability is at its “lowest level… since June 2008, when the [Chinese] government was in the midst of another tightening campaign prior to the financial crisis that began later that year.”

However, Dow Jones Indexes’ analysis of the best- and worst-performing industry sectors showed that worldwide, banks or financial services were among the worst-performing, while “consumer discretionary” areas such as autos and travel/leisure were among the best. If investors are spending on “nice-to-haves” rather than on prudent savings, then—coupled with still-high unemployment and a rising US debt-to-GDP ratio—this could be another warning signal for the still-fragile economy... and a sign that data professionals will be subject to the torturous forces of budgets and expenditure for some time to come.