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Thomson and Paladyne in Real-Time Market Data Alliance
October 9, 2007
Bowing to pressure from traders and technology providers that want market data suppliers to take responsibility for fulfilling exchanges’ data reporting requirements, Thomson Financial and hedge fund technology company Paladyne Systems have formed a distribution alliance.
New York-based Paladyne will provide the Thomson DataFeed real-time market and pricing data service directly to its customers--nearly 50 hedge funds with assets under management ranging from $100 million to $30 billion. In turn, Thomson will act as the agency of record for Paladyne clients--ensuring that use of the exchanges’ market data is properly billed and accounted for. Hedge funds or their technology vendors typically assume responsibility for such tasks.
The agreement will significantly cut the cost of real-time market data for hedge funds, according to Steven Rosenberg, VP of third-party distribution at Thomson Financial, a division of Thomson Corp. “Normally they would have to invest in the infrastructure for reporting purposes as well as the integration systems, and then take the time to integrate all their different data feeds--sometimes hiring 20 to 30 different developers at a cost of hundreds of thousands of dollars.”
“Managing exchange reporting requirements is a very onerous task,” said Paladyne CEO Sameer Shalaby, adding that the process can be time consuming and expensive and creates considerable liability for a service provider. However, most data suppliers already have the necessary relationships in place with the exchanges and are better equipped to manage the reporting process. “Most vendors would prefer not to do it,” he noted.
Thomson is able to provide such services easily, according to Shalaby, because of its commercial agreement with Wombat Financial Software, which was announced in February. By licensing and embedding the Wombat technology into its real-time data feed, Thomson can offer low-latency access to exchanges with multiple deployment options, including on-site, hosted and collocation services.
Thomson can embed the Wombat technology in “Paladyne’s application, deliver real-time data from the exchanges, account for it and be able to entitle it,” said Rosenberg. Entitling the data entails tracking users on an individual basis. “If you are going to redistribute an exchange’s data, they want to know exactly who is going to be using it, and how, and that they are properly paying for its use,” he added.
Brian Shapiro, a partner with CarbonBased Consulting, a New York-based management and technology advisory firm to hedge funds, was not surprised by the announcement. He said that it is about time that data providers such as Thomson, Bloomberg, Interactive Data Corp. and Reuters take responsibility for reporting to exchanges.
“This is something the data providers should have been doing anyway,” said Shapiro, who noted that they have been getting pressure of late from both the exchanges and data aggregation firms to assume the burden of reporting compliance. “In the long term, this will make it much easier for clients to sign up for these services.”
Paladyne users will only have access to real-time data from North American exchanges for now, according to Rosenberg, but there are plans to add data from other markets. “The exchanges want to make sure we account for everyone using their data and so we are taking a very tactical and sensitive approach to this process,” he said.
Rosenberg said the new service will cost $400 per user per month; he expects to charge a monthly fee of $600 per user for access to markets outside of North America. He cautioned that the fee is “just for the data,” and does not cover the cost of Paladyne applications. Users will also pay exchange fees.
