January 20, 2012

Check out Advanced Trading's Market Data Q&As with Xignite, Fidessa, Asset Control and Bloomberg.

Advanced Trading: How are buy-side firms obtaining their market data? Are they getting it from the sell side or broker-dealer or from providers like Bloomberg and Thomson Reuters?

Bill Ruvo, Thomson Reuters: Buy-side firms generally obtain access to market data through two sources: prime brokers and vendors such as Thomson Reuters. Another way buy-side firms access market data is through third-party application providers who incorporate market data as part of their offering. In nearly all cases, the market data is supplied by a neutral vendor such as Thomson Reuters.

The key to providing the buy side with market data is having fit-for-purpose solutions with respect to coverage (e.g. real time, evaluated pricing, reference data) and performance (latency), as well as the ability to integrate that data with valuable tools and analytics.

Advanced Trading: Have market data firms finally figured out a way to charge for market data? Is it by the seat, or per view or per trade? Is this still an issue?

Ruvo: Market data vendors must have proper and clear commercial licensing arrangements for the different ways that customers consume and use their content. At a very base level, vendors need to discern between eyeballs on terminals and machine based or application consumption. The coverage and performance requirements for these two different use cases differ dramatically. In addition to disciplined commercial models, vendors need to stay on top of and cater to their customers' evolving business needs which may range from a consolidated feed to drive a portfolio valuation application or a complex co-location/proximity hosting strategy for algo trading.

Advanced Trading: How are hedge funds dealing with multiple market data feeds?

Ruvo: The most effective way of dealing with multiple market data feeds is a high-performance platform that integrates, normalizes and distributes information from various sources efficiently and with precision. It's critical that a market data platform be available in both deployed and hosted/fully managed formats so customers' business objectives aren't stymied by inflexible delivery models.

Advanced Trading: What are the challenges for buy-side firms when dealing with market data? Do they have their market data management tools in place to properly do this job?

Ruvo: The challenge is simplicity. More specifically, having access to a replete source of quality market data that spans the spectrum from accurate fair value pricing to low latency real time exchange data to premium OTC content from trusted sources, all normalized and delivered via a single connection. In addition, the ability to commingle data from multiple sources in one environment contributes significantly to the simplification.

Advanced Trading: How do hedge funds and prop trading shops store their market data? Are they content to hand this chore over to the sell side or push it onto the cloud?

Ruvo: Historical tick data is critical to many buy-side firms' strategies. Access to deep history and the ability to store data going forward is becoming more and more important to back testing strategies. A cloud-based solution is ideal for buy-side firms who have little desire to maintain terabytes of data on site.

Advanced Trading: Are buy-side firms open to using cloud solutions for their market data requirements and tasks? If not, why not? Security issues? Client confidentiality?

Ruvo: Buy-side firms are most definitely looking to cloud solutions in an effort to contain costs. However, the nature of the market data for which these firms will rely on cloud is segmented at this time. For example, a cloud based solution for historical data -- and a pay-as-you-go model -- is appealing to many smaller buy-side firms and start up hedge funds.

Advanced Trading: Please give a real-world example of how your firm helped a buy-side with their market data needs. Tell us what market data challenge they had and how you helped. Did it help with returns, for example? If so, how?

Ruvo: Buy-side clients are increasingly cost conscious not only specifically around market data but with regard to the total cost of ownership of a market data operation including their platform footprint, data center space and staff. In many instances Thomson Reuters has assisted buy-side customers contain their costs through our Managed Services proposition where we take on this heavy lifting and let our customers get on with their business. We are able to provide this service through our Elektron hosting proposition which provides access to global content, a fully outsourced and managed platform and proximity hosting services for customer specific and third-party applications.

In each instance we have proven to the customer that there are significant cost savings to be had -- along with performance improvements -- by outsourcing their infrastructure to a trusted partner with deep experience and all the content sets/asset classes required.

ABOUT THE AUTHOR
Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining ...