Steven Roe, Vice President of Market Data Solutions at TNS Financial Markets, explores the strategic advantage of a one-stop-shop for market data feeds within the data centre.

In today’s competitive trading environment, effective trading infrastructure demands significant investment and oversight. For banks and hedge funds, the need for reliable market data is crucial to maintaining a competitive edge. Many firms source their market data from multiple vendors, each of which presents onboarding challenges, security implications, and the need for new circuits and infrastructure within the data centre. This complexity can be costly, difficult to manage and inefficient to operate.

To address these challenges, many institutions are realising that a one-stop-shop approach that consolidates services under a vendor-agnostic provider is the solution. By outsourcing services such as hardware acquisition, colocation, market data delivery, support, commercial administration, and monitoring, financial institutions may be able to streamline their enterprise and help reduce costs. This feature-rich solution includes tools for tracking usage patterns, managing outages, and optimising capacity, while providing access to exchanges and consolidated feed providers.

The cost of complexity

Managing multiple vendors for market data can introduce significant challenges. Each vendor requires its own onboarding process, including security reviews, compliance checks, installation of new infrastructure and circuits within the data centre. These processes consume time and can introduce risks, which may make management more complex.

A one-stop-shop solution helps to eliminate these inefficiencies. By consolidating services, institutions avoid the overhead of managing multiple vendors. Instead, they work with a single partner that delivers integrated services, including support and management across all data operations. The ‘as-a-service’ approach can help eliminate capital expenditure while enhancing flexibility. These scalable solutions can grow on-demand with the firm’s needs.

Simplifying operations through outsourcing

Outsourcing market data management can simplify operations by centralising key services such as colocation, connectivity, capacity management, and administration. A one-stop-shop provider delivers tools to monitor usage patterns, track outages, and manage capacity effectively. By providing real-time insights, financial institutions can optimise performance and ensure compliance. As the industry continues to evolve, challenges in locating skilled resources have been moved to the forefront. Supporting financial environments, applications, end users, etc., is a skill that takes years to develop. Outsourcing is an approach to solving that problem which can mitigate the risk of attrition.

This model can also improve service quality. By managing all aspects of the market data pipeline – from setup to real-time monitoring – providers ensure smooth operations. Outsource providers are often incentivised and motivated to continually evaluate processes, procedures, technologies and invest in solutions that can provide a competitive advantage to their clients. 

Optimising market data costs

As market data costs rise, financial institutions are increasingly focused on optimising their environments. Audits of the existing infrastructure – including contracts, licensing agreements, real-time data feeds, and usage – are essential to uncover inefficiencies. These audits can highlight areas where firms are overspending or underutilising resources, opening opportunities for cost savings.

A one-stop-shop provider can guide this process and implement an optimisation plan. By consolidating data services, providers may help reduce consumption, adjust licensing agreements, and streamline operations to ensure compliance with regulations.

The value of low latency in systematic trading

For systematic traders, low latency can be the difference between profit and loss. Connectivity is critical, especially in high-frequency and systematic trading environments. The ability to execute trades quickly requires infrastructure that minimises the time between data input and execution. Many financial firms seek to be located as close to the exchanges as possible to help ensure that they are not at a competitive disadvantage to others on the street.

A one-stop-shop provider offers low-latency infrastructure, with data sources positioned close to major exchanges. By outsourcing both colocation and market data management to a single provider, firms can reduce latency and improve trading performance. This setup also allows flexibility to scale services as needed.

Optimising infrastructure to reduce latency also contributes to cost-efficiency. By carefully managing their market data environment, firms can help reduce operational overhead while supporting low-latency trading.

A Proactive Approach to Exchange Audits

Financial institutions are increasingly facing audit scrutiny from exchanges. These audits are often triggered by reporting discrepancies or errors, often due to misunderstandings of evolving contract rules. Such errors can lead to significant fines, especially for organisations without a global head of market data or a commercial management team.

A one-stop-shop provider can identify reporting gaps and manage audit defense strategies to avoid fines. By staying ahead of regulatory changes and ensuring accurate reporting, these partners help firms mitigate risks and reduce fines, protecting against financial and reputational damage.

Conclusion

In an increasingly complex financial landscape, where the cost of managing market data is rising, institutions must explore more efficient ways of operating. A one-stop-shop solution, facilitated through outsourcing, provides the infrastructure, expertise, and flexibility that modern trading environments demand. Providers like TNS offer services that can help streamline operations, reduce costs, and give firms a competitive edge. By consolidating market data services under a single provider, financial institutions can focus on more strategic functions to help increase shareholder value.