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Ivy Schmerken
Ivy Schmerken
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The Buy Side Wants Transparency, So Get Ready for Big Data

Equity traders are concerned about how many "hops" their orders are taking in the electronic marketplace, so FIX message tags are a hot topic on the buy side.

One of the hot topics at an institutional trading conference this week in New York City had to do with the buy-side tracking their orders as “hops along the way.” That may seem like a strange phrase, but with the complexity of executing algorithmic orders across many different lit and dark venues, buy side traders are asking their brokers for more data to gain transparency into order routing practices.

Since large orders are broken up into tens if not hundreds of pieces, and then executed across different dark pools and lit exchanges before the entire order is filled, buy side traders are not necessarily aware of all the "hops" their orders make.

While some buy-side firms are already receiving execution data back from Tag 30, a message tag from the FIX Protocol, which shows the end destination. But firms are showing interest in additional data through Tag 29 and Tag 851, according to David Hagen, VP, Global Trading Technologies for Boston-based Linedata, who attended the conference session.

Tag 29 is of interest because it would show the buy side if the broker acted on an agency basis or as principal or cross agency or cross principal, said Hagen. The other tag is No. 851which would indicate, if “the broker added liquidity, removed liquidity or routed away or added to an auction,” said Hagen.

Order management and execution management systems (OMS/EMS) are able to capture and store the FIX tags. However, taking all of this data into buy-side shops and systems could be burdensome. “The jury is still out on if this is going to take off,” said Hagen. “It’s going to be costly to deliver that data and to manage it,” he said.

During the trader conference, institutions were asked what it would do with all of this data. One buy side trader said his firm cared about the data because “it was leaving breadcrumbs” along the way. It’s not clear that buy-side firms will be doing data mining which would probably require the support of their IT departments, Hagen suggested. But this can easily turn into a Big Data problem for the buy side.

The move also suggests that buy-side firms are taking ownership of their orders and their data. Another institutional trader conveyed, “It’s my order, and I deserve to know what’s being done with it,” related Hagen.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio
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ischmerken
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ischmerken,
User Rank: Apprentice
2/4/2013 | 8:57:02 PM
re: The Buy Side Wants Transparency, So Get Ready for Big Data
-áThere is more demand for transparency and institutional money managers/mutual funds are asking their brokers to supply more data. In this case, it's order routing data which can be used to gauge their brokers' performance. Brokers that supply more data/transparency can certainly say this is a value added service, but eventually this could become what's expected.
Ivy Schmerken
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Ivy Schmerken,
User Rank: Apprentice
2/4/2013 | 8:57:02 PM
re: The Buy Side Wants Transparency, So Get Ready for Big Data
-áThere is more demand for transparency and institutional money managers/mutual funds are asking their brokers to supply more data. In this case, it's order routing data which can be used to gauge their brokers' performance. Brokers that supply more data/transparency can certainly say this is a value added service, but eventually this could become what's expected.
KBurger
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KBurger,
User Rank: Author
2/4/2013 | 8:13:36 PM
re: The Buy Side Wants Transparency, So Get Ready for Big Data
Regarding the costly/burdensome aspects of this -- I think companies are going to find it's not an option. Transparency is becoming increasingly expected in all aspects of business, especially in financial services and probably ESPECIALLY in trading. I would imagine an ability to be transparent could become a "selling point" for institutions seeking to attract more traders/partners etc.
ischmerken
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50%
ischmerken,
User Rank: Apprentice
2/4/2013 | 6:03:16 PM
re: The Buy Side Wants Transparency, So Get Ready for Big Data
-áYes, the data could have commercial value, but I think the buy side would want to keep it private. It would divulge information about buy side executions occurring in dark pools that could benefit high frequency traders and help them devise strategies to profit from those patterns.
Ivy Schmerken
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Ivy Schmerken,
User Rank: Apprentice
2/4/2013 | 6:03:16 PM
re: The Buy Side Wants Transparency, So Get Ready for Big Data
-áYes, the data could have commercial value, but I think the buy side would want to keep it private. It would divulge information about buy side executions occurring in dark pools that could benefit high frequency traders and help them devise strategies to profit from those patterns.
ischmerken
50%
50%
ischmerken,
User Rank: Apprentice
2/4/2013 | 5:59:04 PM
re: The Buy Side Wants Transparency, So Get Ready for Big Data
-áYes, handling Tag 30 data could be a challenge but Tag 30 will only show the last destination. The buy side wants to see the whole enchilada and this could be a data tsunami that they will regret. I suspect this is of interesting to the largest asset managers that have data management structures in place, or those that can hire consultants.
Ivy Schmerken
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Ivy Schmerken,
User Rank: Apprentice
2/4/2013 | 5:59:04 PM
re: The Buy Side Wants Transparency, So Get Ready for Big Data
-áYes, handling Tag 30 data could be a challenge but Tag 30 will only show the last destination. The buy side wants to see the whole enchilada and this could be a data tsunami that they will regret. I suspect this is of interesting to the largest asset managers that have data management structures in place, or those that can hire consultants.
AnthODonnell
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AnthODonnell,
User Rank: Apprentice
2/4/2013 | 5:45:33 PM
re: The Buy Side Wants Transparency, So Get Ready for Big Data
If this data illuminates behavior in the market, might there be commercial value in the data?-á
Greg MacSweeney
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Greg MacSweeney,
User Rank: Apprentice
2/4/2013 | 5:24:58 PM
re: The Buy Side Wants Transparency, So Get Ready for Big Data
I thought Tag 30 data was going to be too much for buy-side institutions to handle. How they are looking at Tag 29 and Tag 851? Wow. That's a lot to take on over a short period of time. A scalable and flexible data management structure is going to be needed to handle all of this, and I don't know if buy side orgs are prepared.
ischmerken
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ischmerken,
User Rank: Apprentice
2/4/2013 | 5:08:00 PM
re: The Buy Side Wants Transparency, So Get Ready for Big Data
Absolutely, there is regulatory attention in the industry, particularly on the dark pools but regulators are behind. As for Big Data, analyzing the message tags could show the buy side where their orders are being executed in dark pools and where they are leaving "bread crumbs" as their orders hop around. Those who have a quant background can pull it off or work, while others may need IT resources.
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