Financial Market Data Web Services – Xignite Blog

In 2011 the cloud finally went from an unproven curiosity to an accepted mainstream technology solution. In 2012 we will witness the deepening penetration of the cloud into the consciousness of multiple industries.  The market data industry is an interesting case in point because the major industry trends are all pointing to the rapid adoption of an on-demand cloud-based market data solution.

Let’s review each of these trends individually to understand how important the cloud will be for the market data industry in 2012:

1. Market Data Supplier Economics

The suppliers of market data are in a state of flux. On one hand, the cost of business is soaring with the new technology resources required to support sky-rocketing message rates, microsecond execution, and new regulation. On the other hand, the exchanges are experiencing sluggish revenue growth. Traditionally exchanges had four distinct sources of revenue: 1.) execution; 2.) listings; 3.) clearing; and 4.) market data. Of these, only market data is growing, while the others have either completely dried up or are not likely to be a significant source of revenue in the future.  The exchanges have responded to these unfavorable economics with a wave of consolidation in an attempt to reduce costs but the health of the industry depends on growing the revenue side of the equation. The exchanges understand that their best revenue strategy is to distribute their most valuable asset, market data, direct to consumers. This strategy has already seen success with the exchanges offering direct feeds, co-location, and other services to their low-latency clients.

In 2012 we will see more exchanges begin to focus on the largely untapped segment of consumers who need market data, such as historical trade and quote data, but are not latency sensitive. This is potentially a huge revenue source for the exchanges and is ideally suited to the on-demand market data cloud. Forward-thinking exchanges such as CME DataCloud, Direct Edge EdgeBook Cloud, and NASDAQ Data-On-Demand, have already moved in this direction, but 2012 will be the year that many more exchanges embrace the market data cloud to sell directly to consumers.

(Read more about how the exchanges are embracing the cloud in our recent blog post – Cloud Strategy for Exchanges and Financial Markets.)

2. Market Data Consumer Economics

As with the suppliers of market data, consumers are also facing an uncertain future. For many consumers, particularly in the financial services industry, the whole process of data management has become overwhelming. The old model of bringing all market data in-house, so that it can be accessed quickly, is under considerable pressure. There is now simply too much data to do this cost-effectively. Another related issue is time to implementation. With intense competition, many investment firms require immediate access to global and multi-asset class market data. Unfortunately, the traditional method of having a vendor add a feed can be a very slow process. Investment firms require a much more nimble solution that allows them to quickly access discrete data sets.

In 2012 we’ll see more firms conclude that not all data should be brought in-house. This change in mindset will lead firms to become much more discerning about what data should be stored locally, and what data should be retrieved on an ad-hoc basis from a market data cloud.

3. Proliferation of Mobile Devices

It is clear that we are in the midst of a technological sea change Read more

Technology has led a dynamic transformation of the exchange industry, and cloud strategies are an important factor in unlocking the revenue potential of exchange data.  The following article about how to monetize exchange data via the cloud was recently published in “How To Build An Exchange,” a fascinating must-read collection from our friends at Mondo Visione.  Request access to the full collection from Mondo Visione here. 

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Monetizing Market Data in an Evolving Global Marketplace

The global environment for exchanges and data originators is rapidly evolving with exploding data volumes, increasing and unpredictable regulation, expanding variety of financial instruments, fragmenting market, competitive encroachment and the need for new sources of revenue. Beyond these challenges, the race to microsecond latency will stretch the infrastructure capacities and budgets at major financial services firms.

Exchanges and data originators are struggling to service the opportunities of the future with the products and solutions of the past. A paradigm shift is rapidly approaching as old monolithic systems designed for universal applicability are being replaced by new custom tailored micro and mobile apps designed to satisfy the needs of a specific knowledge worker or user type.

The emergence of new mobile technologies and use-specific applications is altering the usage patterns of market data and changing the ways market data is purchased and consumed. If an emerging exchange is to succeed, it must tackle these issues in new ways.

A few years from now the market data application mix will boil down to two distinct flavors: low latency and everything else. How will exchanges capture new market data revenue profitably and manage the delivery of these two distinct flavors when their target applications, usage patterns and infrastructure requirements are so dramatically different? Read more

The last few years have been undeniably tough for the once brash hedge fund industry. Recent headlines do not suggest any improvement with August being the worst month for hedge funds since October 2008, and marquee firms like Paulson & Company firm down 34% year-to-date.  Prior to the crisis of 2008, the industry appeared to be on a steady upward trajectory, evolving from a small, scrappy upstart, that catered to high net worth investors, to a more formalized $2 trillion industry, that serviced the largest pension funds in the world. Since the crisis, however, the industry seems to have lost its way. What exactly happened and how can what we term the “Hedge Fund Cloud” return the industry to its former glory?

Institutionalize or Die

Pre-crisis, managers believed that the measure of success was not only returns but assets under management. In their race to acquire new assets, managers were motivated to “institutionalize” their infrastructure so that they could go after the really big allocations from large pension funds and endowments. For many firms this institutionalization meant leaving the relative simplicity of their single prime relationship to the much more complex world of building out their own multi-prime infrastructure. Almost overnight managers found themselves running complex and unwieldy businesses. Seemingly simple operations like adding a strategy, that required a new asset-class, or producing a new report, became long and involved IT projects.  Any thought of outsourcing any of this burden was dismissed because of perceived privacy and control concerns.

Prisoners of their own Hedge fund Infrastructure

The actual crisis further exposed the inflexibility of hedge funds’ infrastructures. Managers struggled to view their true exposure across asset classes and multi-prime relationships. Just when managers most needed their former agility they discovered that they had become prisoners of their own expensive infrastructures.

Fast forward to today. We are still experiencing the after effects of the crisis. A strong regulatory backlash response has been unavoidable. There is still tremendous uncertainly about the true impact of these new regulations, but what is certain, is that the business of running a hedge fund will become even more complex and costly.

How can the industry remove itself from this funk and prepare itself for the next crisis? The answer is that the industry needs to return to basics by once again making alpha generation its sole focus. The industry needs to regain its former investment agility. In short, managers need to get out of the running-a-hedge-fund business and get back to the investment business.

The Hedge Fund Cloud to the Rescue

Fortunately, the Hedge Fund Cloud offers managers the opportunity to get back to basics.  The Hedge Fund Cloud allows Read more

Perhaps nowhere more in the diverse world of hedge fund strategies is the prospect of alpha decay more unsettling than at high-frequency trading firms. In many ways high-frequency trading firms are now facing a reality that other hedge funds with more esoteric strategies may one day face – too much money chasing a finite amount of alpha.

The End of the Hardware Arms Race

The latest figures indicate that high-frequency trading now accounts for somewhere between 60-70% of trading volume in the US. This is up from around 35% just five short years ago. High-frequency trading firms, that in the past have been among the most profitable on Wall Street, are now seeing that increased competition has crowded out many of their traditional strategies. High-frequency trading firms have responded by co-locating their black boxes and by throwing ever more expensive hardware at the problem. This approach has worked for some of the larger, better-funded firms, but only postpones the inevitable.

What will happen when this hardware arms race meets the laws of physics? The answer is that many of these firms will need to develop high-frequency trading strategies where alpha is still relatively abundant and competition less fierce.

New High-Frequency Trading Alpha Opportunities

The two most common opportunities that high-frequency trading are now exploring are as follows:

1. Alpha outside the US – The US was the first to develop electronic trading, other regions are still in the process of building out their electronic trading infrastructure. A recent Credit Suisse study estimated that high-frequency trading activity accounts for 35% in Europe and only 10% in Asia (excluding Japan). Many high-frequency trading firms are now seeking to port the strategies that worked so well in the US over to these less developed markets.
2. Multi-Dimensional Strategies – The traditional strategies of high-frequency trading have typically been one-dimensional involving the high-frequency trading in and out of a single large, liquid name. The newer high-frequency trading strategies are much more complex and multi-dimensional in nature searching for arbitrage opportunities across asset-classes, geographies etc.

The New Arms Race and Cloud-based Market Data

The common thread that runs through these new strategies is the need for access to more diverse and dispersed market data sets. Market data Read more

Each of the three largest US exchanges, NASDAQ, NYSE and CME Group has recently announced its cloud strategy, but exchanges and financial markets as a group have been slow to get on the cloud bandwagon. Too slow given the potential benefits to their customers and their own needs to increase revenue, market transparency and competitive advantage. That according to a recent white paper released by The Melbourne Group entitled The Winds of Change in Market Data : Winning Cloud Strategies for Exchanges and Trading Venues.

The new NYSE Technologies’ Capital Markets Community Platform is a significant and bold IaaS play that aspires to become the Amazon Web Services for financial markets by leveraging the tight community and unique technology needs within financial services that so often prevent generic offerings like AWS and Azure from competing on Wall Street. NASDAQ and CME Group on the other hand have placed their initial cloud bets one level up on the cloud stack with data-as-a-service offerings, NASDAQ Data-on-Demand and CME Data Cloud respectively.

Now that the big three have all made claims to the cloud, it seems like only a matter of time before each of the remaining hundreds of stock exchanges and trading venues around the world follows suit with its own cloud strategy. Right? The answer is not so clear, because Read more

Like many of us, you may have run into challenges when importing real-time market data in Excel, Visual Studio & SQL Server. With the recent addition of Xignite Financial Market Data to the Microsoft Azure Marketplace Datamarket, users can now pull live stock quotes directly into Microsoft Excel 2010, develop data rich applications using Visual Studio 2010 and seamlessly populate backend database with SQL Server 2010.

In late 2010, Xignite and Microsoft teamed up to make XigniteBATSLastSale, a real-time stock quote data service, available through the Azure Marketplace Datamarket, with the addition of other datasets scheduled to rollout in the months ahead. With this, Microsoft users can obtain instant online access to real-time stock quotes from the BATS Exchange. Now everyone from hardcore mobile app developers to garage based startups can obtain access to the same professional grade APIs to power their applications.

New to Xignite is the addition of OData, or Open Data Protocol, a method of querying and updating data which unlocks the data from the silos that exist in legacy applications. Today, OData is being used to expose and access information from a variety of sources including, but not limited to, relational databases, file systems, content management systems and traditional Web sites.

Wes Yanaga with Microsoft’s Channel 9 sat down with Shoshanna Budzianowski (SQL Azure) and Chas Cooper (Xignite) to get the low down on what this partnership is all about, and how it will benefit end user around the globe.

After the Channel 9 video was completed, Shoshanna Budzianowski sat down with Marc Bollinger, Web Service Engineer at Xignite, for some one-on-one developer talk and a bit of programming fun (CLICK MORE to see developer video)

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New to Xignite?  Curious about what we do and what were all about?  This interview with Xignite’s Joel York may provide the answers your looking for.  Visit TMCnet.com to view other videos from leading Silicon Valley companies.