TraderEvolution has hosted a webinar on the intricacies of market data for FX and CFD brokers who wish to keep up with the times and deploy a robust and cost-effective multi-asset product offering, with risk mitigation, analysis, and reporting.
Panellists explained how to overcome data challenges faced by brokers today when launching new tradable asset classes and providing market data to “pro” traders.
The unique panel featured Roman Nalivayko from TraderEvolution Global, Richard Barden from CBOE, and Anthony Mulira from ICE Data Services, with FinanceFeeds Editor in Chief, Nikolai Isayev, as the moderator.
The webinar kicked off by enumerating the challenges faced by brokerage clients relating to market data when looking to add exchange-traded products to their offering.
ICE Data Services’ Anthony Mulira pointed to control cost and risk, stability and reliability, who is consuming the data, the average volume of info that is being streamed, and, lastly, the implications of data licensing.
For Cboe’s Richard Barden, understanding market structure, compliance and cost, and provenance of the data are the main challenges he identifies as part of his job as Director of Market Data Sales at the leading exchange operator.
Roman Nalivayko, the chief executive of TraderEvolution Global, has the view of a technologist. His firm is a multi-market trading platform provider offering modular, tailored solutions that include a back-end with established connectivities to dozens of markets across the globe, and a complex front-end suite with web, mobile, and desktop applications.
Simply put, automation solves many of the challenges for brokers having to deal with the endless streams of complex market data relating to exchange-traded products.
“As a platform vendor we try to address them as much as we can”, he said. While TraderEvolution cannot change the rules, it can help brokers be compliant, control data usage required by exchanges, and reduce the cost for the broker and end-user.
In regard to costs, he explained TraderEvolution boasts functionalities that allow brokers to optimize the cost of market data. For example, the option to use delayed data or snapshots instead of real-time.
To track data usage effectively, an automated solution requires much less work for the broker and minimizes potential issues for the back office team.
Market data is a beast and brokers understandably look to find an easy way in, some kind of a “how-to guide” on best practices, but the consensus among panellists is that it doesn’t exist as market data can be viewed in many different lenses.
“That’s why brokers should talk to experts to understand their needs and design a solution to consume market data from venues and multiple types of data”, Anthony Mulira said, adding that ICE Data Services has a team of engineers for connectivity, specialists in licensing, and relationships with data providers, which are valuable resources for brokers finding their way.
“Not a playbook”, Anthony continued, “but a partnership with vendors that have experience and work with integrators like TraderEvolution Global and Cboe, which have a deep understanding of the ecosystem and make sure the broker can identify a lead that customers would like so we can supply.”
Cboe’s Richard agreed with Anthony as each client’s requirements are different and the landscape is always changing. “We sit behind ICE and they are the ones who interact with the client in terms of distributing the data directly to them”, he said, adding that software vendors like TraderEvolution Global and connectivity solutions providers make up to three or four firms involved for one single client.
“It becomes more complex than some firms would like to believe, but there are great software vendors, like TraderEvolution Global, with experience in helping brokers move from single to multiple assets within that platform and how it can be achieved.”
Asked about how to advise brokers on best practices from an integration perspective, TraderEvolution Global’s Roman said everything depends on the project, region, and the scale, so it could make sense involving a market data consultancy.
“From there we can discuss the structure and the use case directly with the exchange, the primary source of information”, he said, adding that the software vendor shares its experience with clients on data flow and usage control.
As multi-asset offerings get bigger for retail and institutional traders and market data plays a large part in launching these new asset classes at brokerages, Nikolai asked the inevitable question: “How difficult is it to get market data from basically every market out there, because it seems like a lot of the data must be fragmented in some way”.
“That’s where we come in”, said Anthony Mulira, the pre-sales executive at ICE Data Services. “Our role is to effectively create a single interface so our customers can take whatever asset classes, data they need. It could be normalized, put into the same format so it can be consumed easily. We have different ways to make it easier to consume different asset classes, whether that be how the instruments are identified or the interface.”
“As a provider, we add strategic content, so as brokers evolve, data vendors evolve as well. Interface and data sets are available relatively quickly and easily with ICE as opposed to working with different sources and having to maintain different ways to consume data.”
Cboe’s Richard handed in to ICE’s Anthony. “We operate many exchanges and have a cloud offering, but 99.9% of clients that connect to us do so via vendors because they may have a broad range of data requirements which a vendor can help with.”
“Brokers need data, but also reference data, corporate action data, historical data, in order to help build a service. About fragmentation, it can add complexity, but the flipside is choice.”
Firms in the United States and Europe are given a choice in terms of where they go to buy data from. A combination of the coverage of instruments, liquidity (reliability and accuracy), and how much is it going to cost the broker.
“For Cboe, fragmentation has allowed us to engage with a lot more clients and prospects who began to understand that fragmentation means there are choices to where they go to get stock prices from”, Richard continued, adding that data vendors such as ICE Data Services can mitigate fragmentation from a technical perspective, but from a “simple choice” perspective, fragmentation has actually been beneficial for brokers, driving product innovation and cost reduction.
Also in regard to fragmentation, TraderEvolution Global’s chief executive Roman Nalivayko recommended brokers to use a single market data vendor such as ICE. This simplifies the structure, maintenance, and probably cost.
The way how brokerage software is designed plays a big role in handling market data by the broker, including his end-users experience. For example, nowadays it is unacceptable to use suffixes for the same tickers traded on different exchanges as GUIs need to be as simple as possible, and a well-thought system should be dealing with such complexities
Market structure and regulation specific to each market also take a toll in handling market data and this is where TraderEvolution Global shines. “We work hard not just to implement market requirements but most importantly to make them play well together and not affect each other.”
As exchange operators require monitoring data for regulatory reasons, it could pose risks for multi-asset brokers using this kind of data, but it depends on the jurisdiction.
Cboe’s Richard explained that is less of an issue in Europe, where typically the exchange doesn’t require brokers to report individual users. The number of clients will suffice, but there are three classifications in Europe – pros, experienced, retail – with different tiers of fee associated.
In the United States, some regulators want brokers to check all retail clients and make sure they don’t work for financial services firms in certain roles as it can require additional reporting requirements for those firms.
As exchanges enforce the accurate distribution of data, vendors like ICE Data Services offer expertise, feed, and tools that help firms with the reporting and understanding of how the data is being used, where it is going.
TraderEvolution’s system reports back to exchanges about the data usage. “Our tech controls data usage, allows to discuss the classification, sign electronic exchange agreements, helps automate and collect fees for the different types of subscriptions”, said Roman. “Overall, our role is to provide the needed mechanisms that allow brokers to stay compliant with regulations.”
Back to Cboe, Richard Barden reminded that the exchange operator is less concerned than other venues with user accounts because in Europe and a lot of clients with US equities markets “we don’t see them incurring any costs for retail end-users”.
“So we’re happy with them reporting just a general number, while other exchanges will charge a dollar for each retail client that a broker has. Therefore, they’re gonna be quite laser-focused on making sure those user reports are highly accurate and if not.”
In regard to talks of a consolidated tape in Europe proposed by ESMA, Richard is sceptic that harmonization will happen as intended. “I don’t see exchanges wanting to fully harmonize because these are commercial entities, competing with each other for both trading and market data revenue.” So, chances are that exchanges will always find a way to be different in order to better compete.
Brokers often ignore or miss the technology aspect of introducing a trading offering with exchange-traded products (ETPs), according to Roman Nalivayko, who pointed to their lack of experience with this kind of instruments, which leads brokers not to put together the right requirements and, as a result, their choice is not optimal.
Comparing an FX trading setup to a multi-asset offering setup, the number of instruments is quite limited in FX as the broker has just a few hundred, static instruments, which are not updated daily. Real-time and historical prices could be different from other brokers due to the nature of this instrument type. With FX, many basic workloads, such as adding instruments, can be made manually.
A multi asset project – equities, futures, options – has a huge number of instruments and this can only be automated. “It cannot be done manually. ETPs are not static: IPOs, symbol change, expiration of derivatives contracts, and so on. This requires automation as well”, said Roman, adding that corrections can take place on exchange – price or volume – so data must be reconciled in order to stay synchronized with the primary source.
“Automation is the most important but ignored aspect. In our case, we try to automate as many processes as we can”.
Cboe’s Richard recommends brokers to do some research. understand what they want to achieve and how, talk to some people within the industry and he offered to put them in touch with data vendors, such as ICE Data Services, and software vendors, such as TraderEvolution Global.
As volumes of market data are only going up, ICE’s Anthony advises brokers to make sure they have flexibility and room for growth from a technical point of view.
With Cryptos being in very high demand and brokers wanting to implement the asset class in their product offerings, vendors have taken action to provide institutional-grade market data products. In the case of ICE Data Services, Anthony explained the firm partnered with blockstream and ensures data is properly licensed and can be distributed to the right user types.
Cboe is also interacting with crypto in a number of ways. “We have a relation with CoinRoutes, an institutional order routing network for crypto. We have taken onboard its content to create a number of crypto benchmark indexes”, said Richard Barden, who also referred to the deal to acquire crypto exchange ErisX.
“We powered a number of fractional share trading services. a hybrid product between crypto and traditional exchanges which have been of great interest for the retail trading community as of late”.
TraderEvolution Global supports both CFDs and Physical Crypto, as the new asset class is not considered exotic. “It’s equal to equities among clients. It’s like any other instrument type. It cannot be ignored by brokerages and they should be part of their offering”, said CEO Roman Nalivayko.
“As for the technical aspect, we had issues with the exchanges’ APIs in the early days but they are now evolving to become more reliable and stable to work with.”
The panel then answered a few questions in the Q&A section of the webinar, including how well are traditional brokers prepared for the new decentralized markets from a regulation perspective (KYC; AML, GDPR) and if they will survive in the existing form. Another participant asked about issues with the classification of users, which complicates brokers’ onboarding process.
The full webinar and Q&A can be found here.