ACTIV Financial's Ben Collins discusses the challenges and changing landscape of market data and the underlying delivery technology.
ACTIV Financial, a global provider of financial market data and solutions, recently welcomed aboard Ben Collins to its London-based team as director of sales, EMEA. Collins has 15 years of sales management experience and will support ACTIV’s ongoing expansion in European and Asian markets.
"It is a quite a busy market place in the EU," says Collins in an interview. "There are a lot of players that appear to do similar things on the label but when you get under the covers people do things differently. My challenge is taking the US model and transferring it to the EU."
In the EU, the market data world is dominated by couple major players (Thomson Reuters, Bloomberg), and their clients have been traditional in the purchase of market data feeds. But if you consider how technology has developed in last five years in terms of distribution and amount of data to process, a lot of traditional firms don't have infrastructure or capabilities to embrace modern technology, explains Collins.
Data volumes have grown between 1.5-2x per year over the last three years. The huge increase has strained technology to accurately cope with the data. All the while, for regulatory purposes the granularity on data is supposed to be greater and as a result, low latency -- the buzzword of years past -- has faded in its importance next to reliability, and accuracy.
A good example of the importance of reliable data is proving best execution. Best execution is a part of regulation that states bank must prove it trades at the best price on behalf of their client (as to deter profiting from a margin). Bank needs to be able to record all prices coming through in order to prove they traded at the best price, a daunting task when the available data is growing so rapidly. "Nowadays, banks don't want to get speed of delivery at the cost of a fully available feed," adds Ben.
“US leads the way in volume growth but it's a passage followed in EU and an additional number of venues,” says Frank Piasecki, ACTIV president and co-founder. “There are traditional exchanges and now on top of that virtual exchanges that will also trade more instruments and see more activity from natural participants.”
Another trend Collins and Piasecki say are driving the industry is how much further high quality and reliable pricing data is expected to go to retail clients. "Again, 10 years ago you'd expect main consumers of real-time trading data would be some sort of trading professional," says Piasecki. "What we see now is growth of internet portals, so the reach is much further. Now a retail investor is expecting same quality data as a professional. Technology needs to keep up with that and send data at a larger scale."
Differentiation Through Licensing
For data vendors, a key differentiator might be the speed of delivery or processing, but it's also how vendors can handle various licensing. Exchanges are changing business models as distribution of data becomes more important to their revenue stream than listing prices. "A lot of data we send to ACTIV isn’t our data, it’s NYSE data, Nasdaq data, etc. All those who distribute the data do so under a license with the exchange," explains Piasecki. "Under 10 year ago there was an increase in fees for Internet usage, and it's since become a lot more complicated and driven exchange revenue up."
Understandably, clients would prefer to focus on traditional banking than taking on the collection and distribution of exchange technology or becoming experts in exchange regulation and compliance. "We have to manage that on behalf of our clients. Industry-wide it’s becoming an increasingly important part of the function a vendor does for clients."
Inspection of Market Technology
Another great industry challenge comes on the footsteps of Nasdaq and Goldman's recent data feed glitches, leaving traders anticipating increased scrutiny of market technology. "Both the SEC and FSA are talking about code review in trading and data systems," says Piasecki. Suddenly the industry has regulators coming in exploring the technology. That is profound because these are extensive and deeply scrutinized market solutions that needs to stand up to new standards, and this was a role traditionally left to participants.
"All of this is happening in Europe concurrently, this is all quite global," add Piasecki. "Ben will have to deal with these shifts in markets around the world."