Blog Posts

• Stuart Roberts

Market Data Myths Debunked: Separating Fact from Fiction in Financial Information

In the intricate and complex world of financial markets, one of the most critical elements is market data. In this post, we're going to dismantle some of the myths surrounding market data that I have come across in my career and shed light on the realities.

Myth: It’s only delayed data, therefore it’s free.

This is a commonly held misconception that I’ve encountered numerous times over my career. Often this relates to exchange-based data where specific fees normally apply for real-time rates. While it's true that fees for real-time data are generally higher, many exchanges still charge for access to their delayed data, albeit at a reduced rate. It's imperative for consumers to carefully examine the market data policies of each exchange to understand the costs associated with delayed data usage before making any presumptions about the absence of fees.

Myth: I only use it for development purposes, so it’s free.

Many believe that when technology teams use market data for development and support, it's free of charge. However, this isn't a universal truth. Similar to the policies governing delayed data, the cost implications for IT usage can greatly vary. Certain vendors and exchanges permit the use of data at no cost for a set period during the development phase of a new application, while others may offer it at a reduced fee. Given this diversity in policies, it's crucial to consult with your data provider to understand their specific terms and conditions regarding the use of market data in development environments. Failure to do so could inadvertently lead to unexpected costs or compliance issues.

Myth: Why do I need to pay, I can just scrape it from the internet.

I was asked this by a senior executive who was sponsoring the development of a new portal that would display some market data to clients. The rationale was that the data they wanted to display was already available on sites like Yahoo Finance and could be “scraped” and used in the application.
The reality is sourcing data from another website in such a fashion would be explicitly prohibited in the terms of service and would likely result in legal action from both the website displaying the data and the intellectual property owner ie the exchanges providing the data. In this case, an agreement was negotiated with a market data vendor to provide the data for display on the customer portal.

Myth: More data equals better insights

The advantage of having extensive market data is not just in its quantity but in its quality and relevance. An overabundance of data can lead to 'analysis paralysis,' where the vast array of information impedes quick and informed decision-making. Organizations must focus on acquiring data that is pertinent to their specific goals and can be transformed into actionable insights. This influx of data also impacts infrastructure and IT staff, necessitating enhanced systems capable of managing increased volumes, while maintaining performance and security. IT teams are faced with the dual challenge of upgrading their technological capabilities within budgetary constraints and ensuring their personnel are adept at navigating the complexities of modern data management. Success hinges on balancing the scale of data with the infrastructure's ability to handle it and the team's proficiency in utilizing it effectively.

Myth: Market Data is a commodity and readily interchangeable

There is a common misconception that market data is a commodity, easily interchangeable between sources. The reality is far more complex. Different vendors may excel in certain asset classes, offering distinct data strengths. Even exchange data, which one might assume is uniform across vendors, can present challenges when swapping due to inconsistent symbology (refer to my previous post for an in-depth discussion on this issue).
On the technical side, most vendors use proprietary distribution technologies, necessitating specialized feed handlers or modifications to applications that are processing this data. While migrating between vendors is feasible when data quality is on par, its important to recognize and plan for the additional technical hurdles that such a transition entails. Successful vendor changeovers require careful navigation through these complexities.

In Summary

I hope this sample of some of the misconceptions around market data I’ve encountered was interesting, let me know your thoughts in the comments. Market data is a broad and complex topic from both a technical and commercial perspective. At Sprada we provide clients with the expertise to navigate these complexities to optimise market data spend and improve operational efficiency. Get it touch for a conversation about how we can assist with your market data challenges. Get in touch to find out how we can help you navigate the complexities for market data.