Data Feed v. Data Feeds

HFT Strategies the Same Regardless of Data Feed Variety or Speeds

The Issue:

Former SEC Chairman Mary Jo White has said that a “fairness concern” is the latency difference between the direct data feeds and the consolidated feeds. Some have argued that the lag between the speed in which direct feeds and slower consolidated feeds deliver refreshed stock prices could lead to an unfair advantage for those with the faster feeds. Chairman White suggests exchanges could “include affirmative or negative trading obligations for high-frequency trading firms that employ the fastest, most sophisticated trading tools. Such obligations would be analogous to the ones that historically applied to the proprietary traders with time and place advantages on manual trading floors.”

MMI’s Stance:

If the consolidated feed were replaced with direct feeds for all, it would not affect the strategies of our Member firms. In fact, our Members trade successfully in asset classes with only a single data feed, such as the U.S. Treasury market and the Chicago Mercantile Exchange here in the U.S., and in multiple geographies where there is also only a single data feed.

Further Resources:

December 22, 2015: MMI Member Guest Editorial: Speed up the SIP
MMI Member Adam Nunes writes that a better way to manage access and distribution of basic stock market trading data (SIP), is to offer competing models by allowing: 1) firms to order the SIP data as they do today, by contacting their vendor or the SIP administrator, 2) the firm/vendor connecting to the SIP would get a connection to each exchange to listen to their data where the data is produced (rather than getting the data from a central location) and 3) the firm would receive and process the data similarly to how it handles direct market data feeds.  Unleashing these competitive forces, he reasons, would be an important first step in improving investors’ access to market data.

June 5, 2014: Enhancing Our Equity Market Structure
Speech by SEC Chairman Mary Jo White in which she questions whether trading venues have sufficient opportunity and flexibility to innovate successfully with initiatives that seek to deemphasize (date feed) speed.

August 24, 2015: Fly on the Wall
MMI blog post describing a meeting between Member firms and the staff of a prominent national opinion leader to dispel common misconceptions, including the concept that HFT operations are dependent on taking advantage of fast data feeds.

April 8, 2014: How Slow Is the NBBO? A Comparison with Direct Exchange Feeds
Shengwei Ding of Wells Fargo Securities and Professors John Hanna and Terrence Hendershott of the University of California find the short duration of dislocations makes their costs small for investors who trade infrequently, while the frequency of the dislocations makes them costly for frequent traders.

March 18, 2014: Co-location and Direct Market Data Feeds Promote Efficiency and Transparency
MMI blog post that discusses how colocation (the practice of hosting a firm’s computers in the same facility as the exchange in order to reduce the time it takes to communicate with the exchange) and direct market data feeds are a crucial component to the efficiency of today’s modern markets.

“Main Street is the great beneficiary … We are better off with high-frequency trading than we are without it."

JACK BOGLE, founder Vanguard Group

Moneywatch, April 3, 2014

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