The financial world revolves around news and data, both of which need to be streamed across the world in record time. If you’ve ever wondered how this takes place, we have an explainer here all about real-time market data and its importance for brokers, funds, and retail investors alike.
The Importance of Live Data
Electronic trading revolutionized trading, making it so much easier and faster for everybody involved. In comparison, the ‘70s stock market floor looks like a baffling arrangement of frantic shouting and phone calls that would fall apart if we tried to do it today. While there’s still a lot of shouting, live data takes a lot of stress out of the situation.
We use live data in many formats, not just in the finance world. Stream-hosting websites use livestreaming tech and as we’ll find out, it can get expensive to maintain. Another example is iGaming, where many games like Live Lightning Blackjack or Quantum Roulette work in real time for a live audience who are putting their money forward. Like any industry that has expanded over the internet, live casino gambling has benefited from real-time data that provides its clients with interactive experiences and instant results that can be trusted.
The benefit of live data in finance speaks for itself – traders have more immediate knowledge and a wider support base from which to make decisions. The infrastructure surrounding a live service also necessitates dedicated 24/7 support for said service, allowing traders of all stripes to get assistance wherever needed.
Real-Time Market Data is an Asset…
First, we need to understand that live market data is an asset. In fact, market data curated by exchanges can be considered copyrighted material for minutes, which is why free data streams often have a 15-minute delay or more. Note that technically all data streams will have a latency effect, it’s just that the best and premium options have cut this down to negligible levels. A lot of latency reduction came as a byproduct of high-frequency algorithmic trading, explained below.
There is a huge exception to this – the rise of popular brokerages like Robinhood or Trading 212. While some brokers might keep real-time data behind a paywall, many pop trading platforms give data with a very small delay for free. This is often because they make their money via PFOF – payment for order flow. PFOF has its benefits and drawbacks, just remember that there are no free lunches and the old adage still applies – if a service is free, then you are the product in some way.
… & it is Expensive
For brokers or companies like Google, they need to source their market data from, well, the source. Google gets their data from the relevant exchanges – either the NYSE, NASDAQ or the LSE depending on the stock. The same goes for brokers that have no privileged access to such data. It may sound like a lot but in the grand scheme of things, it’s not much. We mentioned trimming latency earlier, which results in stories where millions of dollars are spent to shave milliseconds.
To access and (more importantly) display this data, buyers would pay five, maybe six figures every month for the license to that data. Even then it’s a relatively basic representation of stock prices, not a second-by-second rundown of the ticker tape and all of the bids/asks coming through.
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