Exchanges Are Adopting the FPL’s FAST Protocol to Speed Up Market Data Rates
Eyeing relentless growth in market data volumes, the London Stock Exchange (LSE)plans to launch a pilot to test the compression of its market data feed using the new FAST (FIX Adapted for Streaming) protocol. Industry sources say FAST -- a data compression technology developed by FIX Protocol Limited (FPL), the nonprofit organization that created the FIX protocol -- is gaining traction and could become a standard among exchanges.
"Customers are looking for faster and faster market data feeds, so we want to look at everything that might achieve that," says Mark Langley, product manager at the LSE. The exchange, which in September 2005 migrated to a new market data dissemination platform called Infolect, is in the final phases of internal testing with FAST. "FAST offers a lower latency feed, the packets are smaller and [it offers] the flexibility to go from one format to another," adds Langley, who notes that the LSE experienced a 69 percent increase in trading volume over the past year.
With market data volumes exploding in equities and options -- fueled by the growth of black box and algorithmic trading strategies, which now are spreading to futures, options and foreign exchange -- exchanges are motivated to find a solution. "Speed is the name of the game now in electronic trading," says Matt Simpson, associate director of electronic trading architecture at the Chicago Mercantile Exchange (CME) and cochair of the FPL Market Data Optimization Working Group. "The faster you can get your data out the door to those black boxes that are going to turn out orders based on the market data, the more volume you're going to see as an exchange."
On top of the already exploding market data volumes, sources project that Reg NMS will generate a lot of quote, order and cancel/replace messages as U.S. equity trading becomes more electronic. At the same time, the options industry is set to adopt penny quoting, which likely will increase data volumes further.
And in Europe, the Markets in Financial Instruments Directive (MiFID), which takes effect next year, is expected to lead to higher volumes of market data as investment banks that internalize trades will be required to publish their pre-trade quotes electronically, notes Richard Gissing, CTO of financial software provider Gissing Software (London). "We've seen estimates for as much as a fourfold increase in volumes of market data affecting instruments that are impacted by MiFID," he says.
As the surge in market data message rates shows no signs of letting up, exchanges are jumping on the FAST bandwagon. "The industry is moving rapidly toward the adoption of FAST," says FPL's Simpson, who notes that in January Archipelago (now NYSE Arca) became the first exchange to implement a FAST feed after its market data volume soared from 15,000 mps to more than 22,000 mps by the end of 2005. As a result, according to Simpson, Archipelago saw the data volume on its binary feed drop by 75 percent.
The International Securities Exchange (ISE) also is planning a rollout of FAST, and the CME is planning to introduce a FAST feed by Q1 2007. OMX, which runs several exchanges and provides software to dozens of others, supports FAST as well. And the Australian Stock Exchange (ASX) purchased software from Cameron Systems to offer a FIX market data feed and plans to deploy a FAST feed, according to industry sources.
Searching for a Cure
The financial markets have been searching for a method to reduce bandwidth requirements for three years. The first effort at compressing market data -- using the FIX protocol -- was conducted by the CME, which reduced market data message size by 40 percent, recalls Simpson. But the results did not go as far as the industry wanted, he adds.
The FIX protocol is pervasive as a global messaging standard in order routing and pre-trade areas -- where it has a 75 percent market share -- and is growing in post-trade applications, Simpson continues. "But in market data it was sorely lagging because of the efficiency of its messages," he says.
"There are really two layers to FAST," Simpson explains. "The first layer removes data redundancies in the market-data feeds, and the next layer takes the data and puts it into a more efficient way to express the data," he says, adding that this is known as the FAST encode. "The encoded data is what saves all the bandwidth. It's what travels across the wire."
Last December, FPL published the results of a proof-of-concept (POC) using FAST. The POC sponsors, which also provided funding, included the CME, Archipelago, the ISE, the LSE, the Singapore Exchange and Microsoft. Testing began in June 2005 with sample data sets from Archipelago, the Options Price Reporting Authority (OPRA), the CME Globex trading system, and the Nordic Exchange (NorEX). The POC demonstrated that FAST achieved a 76 percent overall compression rate on ArcaEx's ArcaBook feed, 76 percent compression on the OPRA feed for options, 80 percent compression on the CME Globex feed -- the largest futures feed -- and an 85 percent compression on the NOREX feed (see chart).
The drawback of any compression technology, however, is that once a feed is compressed, it takes time to decode the feed back to its original state. But in the case of FAST, according to LSE's Langley, "The results we've seen suggest that it's measured in microseconds."
One of the major benefits of FAST is that it has the potential to enable the creation of a market data standard, according to the FPL's Simpson. Though FAST was developed completely apart from FIX, strictly as a data compression solution, he notes, it was designed to work with FIX, and the FPL is using FAST as a springboard toward a market data standard. "There is the potential now to have the same pervasiveness with market data where FIX could fill this vacuum regarding market data standards," says Simpson.
A standard for market data feeds would be a relief for buy- and sell-side firms that consume direct exchange feeds and currently must contend with a host of proprietary protocols, according to Jeromee Johnson, senior analyst and consultant with TABB Group. While most exchanges offer some type of FIX feed, they also have their own proprietary protocols, he explains. But Johnson stresses that the real benefit of the FAST compression algorithm is that firms can use it with other markup languages, such as the Market Data Definition Language (MDDL) from the Financial Information Services Division (FISD) of the Software and Information Industry Association (SIIA). "It doesn't have to be the FIX protocol that's inside it streaming down the line," he says.
"FAST is not necessarily welded to the FIX protocol," adds Gissing Software's Gissing, who is a member of the FISD MiFID Committee and the MiFID Joint Working Group. "You can use the mechanisms that FAST provides for encoding and decoding data, giving you the high-speed, low-bandwidth transmission, and you can apply it to other products as well."
Gaining Traction FAST
While most of the exchanges working with FAST have not yet released production feeds, TABB's Johnson expects more exchanges, especially on the derivatives and equities sides, to offer their market data products in a FAST format. "Beyond 2007, you will see a much higher adoption rate in market data, and in order routing and execution," he says. In the future, Johnson predicts, anybody consuming market data on the buy side or sell side will have a FAST adapter sitting on the other end of that feed so they can consume it, and some of the FIX engine vendors -- such as NYFIX, which acquired Javelin, Cameron Systems and Transact Tools -- will be among the first to offer off-the-shelf tools.
"Certainly, sell-side firms and, even more so, buy-side firms will be interested in prebuilt solutions," confirms FPL's Simpson. Gissing Software already offers FAST Tunnel, an adapter that plugs into any system that generates FIX messages and will turn the FIX messages into a FAST message, and vice versa.
But first, firms are waiting for the exchanges to release their FAST-based market data feeds. "It's very much an internal investigation at the moment," says LSE's Langley. But, "If FAST does emerge as a standard across exchanges, that's certainly something we want to be involved in," he adds. <<<
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
Tweet This