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Taming the Deluge of Data As Global Markets Multiply
Taming the Deluge of DataAs Global Markets Multiply
November 16, 2009
In the middle of last year, David Meitz began to plan for the growing demands of the asset managers and hedge funds that are his agency brokerage's customers, as they grew increasingly active in rapidly multiplying European markets.
Meitz is the managing director and chief technology officer at Investment Technology Group (ITG), based in New York. The independent agency broker and technology provider operates around the globe, with 18 offices in 10 countries, including the United Kingdom, Ireland and Spain. And since the European Union instituted the Markets in Financial Instruments Directive (MiFID) on November 1, 2007, a wide variety of new electronic trading venues, known as multilateral trading facilities (MTFs), have launched, bringing fragmentation to the purchase and sale of shares.
These venues have included BATS Europe, Instinet's Chi-X Europe, Nasdaq OMX Europe and Turquoise, created by nine investment banks, including Credit Suisse and Goldman Sachs. Chi-X Europe, for instance, now accounts for 13% of all electronic trading in European shares, more than the London Stock Exchange, according to Thomson Reuters.
While MiFID's stated purpose was to foster greater competition and encourage best execution by opening up the European market to new, alternative trading venues, ITG's customers, actively trading in Europe, found themselves contending with a barrage of new market data, coming from new trading venues using state-of-the-art, low-latency technology.
As the MTFs in Europe proliferated, ITG started to hear a constant refrain: "Find a way for me to have a consolidated view-in real-time-of all the trade data coming in from the new trading venues in Europe-in particular the new MTFs."
Asset and fund managers wanted the equivalent of a virtual, consolidated quote. This would allow them to more intelligently take advantage of the lower costs touted by the new trading outlets, the arbitrage opportunities they presented as well as the anonymity of dark pools which did not publicly quote bids and offers.
The message to Meitz was clear: "I needed a way to quickly address all the MTF data, given the fragmentation of the EU market; After the MiFID regulation in Europe, it became apparent that this [the push for a consolidated quote] would be an issue for us," he said. Which is where using complex event processing technology to make sense of - and consolidate - the deluge of data from all these venues came in to the picture.
Meitz' goal was to provide a competitive advantage to ITG's customers, particularly those who used its Triton EMS software, which offers direct market access to global markets along with algorithmic strategies and pre-and post-trade analytics. That meant creating a consolidated quote in real-time, for major stocks, while not inducing latency in the firm's trading platforms in the process.
LIVING STREAMS OF DATA
According to Phillip Silitschanu, a senior analyst at Aite Group, ITG is the first firm to consolidate MTF data in real-time, a feat announced in October. He notes that while Thomson Reuters has released a product called Equity Market Share Reporter that aims to consolidate such data, it does not currently do so in real-time. "ITG is now offering its Triton customers a real-time service that empowers the buy side to make better trading decisions," says Miranda Mizen, a principal with Tabb Group who points out that many European traders have complained that there is no consolidated tape for traders.
