The Case for the Consolidated Full Tick OPRA Feed

Inside Market Data
January 23, 2006

I would like to respond to two articles published on Dec. 12, 2005 in Inside Market Data, in which Peter Moss from Reuters reportedly made statements pertaining to the distribution of options data from OPRA. In particular, Mr. Moss contends that (i) the problem with delivering a full tick feed of OPRA data is one of economics and not technology, and (ii) one can no longer make an economic case for delivering a full tick OPRA feed in the traditional way.

First, I believe that most, if not all, data vendors would fully agree with Mr. Moss’ contention that the problem in delivering full tick options data from OPRA is one of economics and not technology. Data vendors that currently deliver the full tick OPRA data have established that the technology to deliver that service does exist today. ComStock demonstrates this on a daily basis, tick by tick by tick. For example, at last count, ComStock was processing over 100,000 messages a second from OPRA alone. (ComStock also offers a mitigated options service with best bid and offer data).

However, I believe that many data vendors take a different view with regard to Mr. Moss’ assertion that “one can no longer make an economic case for delivering a full tick OPRA feed in the traditional way.” Today, ComStock delivers the full tick data from OPRA on its consolidated datafeed, PlusFeed, and yes, our model is economically viable. Below, I will explain how we do it and I will outline the advantages of doing it.Here is how we do it:Over the past two years, as part of Interactive Data Corp.’s integration plan to have the ComStock ticker plant power other Interactive Data companies and business units, ComStock re-engineered its entire ticker plant infrastructure. And while the re-engineering of the ticker plant was not an inexpensive endeavor, as part of a larger Interactive Data data center initiative, the costs were spread across the entire organization, thus supporting the economic case. From a data processing perspective, we ported our applications from Sun to the Linux operating system, and we rewrote key software components including the entire database layer. In addition, we distributed the processing across a broader infrastructure, using some of the latest cutting edge hardware. We also increased our inbound bandwidth capacity from the exchanges and deployed a next-generation client distribution network that can deliver data to clients at 42Mb per second. This new infrastructure is designed to allow us to easily handle the data volumes without having to worry about legacy issues. For our clients, there are several advantages
to getting a full tick OPRA feed: First, the communication costs to bring in redundant OPRA feeds directly from SIAC tend to be significantly more expensive than the communication costs associated with getting the data through a data vendor. One primary reason for this is that the OPRA data from SIAC is not compressed. As a result, at today’s rates, clients that want to get OPRA data direct from SIAC with redundancy must install two diverse OC3 connections. The cost of these lines and the various interconnection
fees and equipment leasing fees can quickly approach $40,000 per month and could even exceed that amount in less urban areas.

Now, compare this with the cost of getting the full tick OPRA service from a consolidated data vendor, such as ComStock. The full tick options service today requires about 10 Mbps in bandwidth. For redundancy purposes, such bandwidth should be doubled. Communication costs for a typical New York metro area client (with redundancy) would be approximately $7,000 to 8,000 per month. I think the economic case is starting to make sense!

And then of course, regardless of where the data is sourced, it must be processed once it is brought in-house. Needless to say, it takes a lot more computer power to process the uncompressed direct OPRA feed than it does to process the full tick compressed feed from the data vendor. The technical solutions in the market to process the uncompressed feed from SIAC typically tend to be much more expensive to install and maintain than the fully managed single OPRA box from a data vendor.