US Data Growth Pushing Latency

US Data Growth Pushing Latency
October 03, 2005

The Markets in Financial Instruments Directive is a potential catalyst for data growth in Europe, although growth is still driven by the US market and particularly by the Options Price Reporting Authority, according to speakers in the latency session.

All four panellists agree that the US currently leads demand for data. The high growth in OPRA's data volumes is one key issue, according to Mark Hepsworth, newly appointed president of ComStock (see related article, this issue). With 3,000 bids being seen for every trade on OPRA, could such traffic be the market data equivalent of spam? he asks. "I think we'll see pushback from customers, and OPRA will have to look at ways of controlling volumes," he says.

Another factor is buy-side behavior, according to Mike Powell, Reuters' global head of real-time enterprise information, who cites the growth of the hedge fund community, the increase in algorithmic trading, trades being broken down into smaller blocks and the rise in electronic trading.

MiFID, which is due to go into effect by April 2007, will create systematic internalizers, who will have to publish data regarding internalized trades to the market. In the legislation's current form, systematic internalizers will only have to publish such data for liquid stocks.

Even so, the regulation could increase data traffic in Europe, says Richard Newbury, head of product services at Telekurs. "It depends on how many systematic internalizers appear, how many stocks are defined as 'liquid,' and how often the systematic internalizers publish prices for liquid stocks," he says.

The panel also highlighted specific problems in dealing with data latency. But Tim Yockel, head of sales for Wombat Financial Software, points out that if exchanges and vendors add as many timestamps as possible, it would be possible to find out where latency was being introduced.