Market Data 101 [Part 3]

Welcome to Part 3 of a 3-part blog series where we break down the basics of market data.  

In Part 1, we learned that market data comes from stock exchanges and can be used in a variety of ways. We learned that there is no “real” stock price, but that the NBBO is arguably the most accurate and most expensive. Lastly, we covered the different types of market data. In Part 2, we covered the different ways you can access market data, how licenses and fees work, and where you can buy market data. In Part 3, we’ll break down those licenses and fees by product type so you can understand what type of market data is best for your own use case.

If you recall from Part 1 of this blog series, the NBBO or National Best Bid and Offer is the creme de la creme of market data. It will include a hefty exchange fee, a technology fee, and a per user fee if you are displaying the data publicly. This is the right market data solution for you if you are engaging in high frequency or systematic trading, starting a hedge fund, or executing trades on behalf of clients.  

Licensing and fees by data type

This solution requires some up front heavy lifting in terms of licensing, testing, and architecting, but once set up you will be streaming live, very high quality quotes that can be used to analyze investments, chart data, or make trades. The total price for a SIP NBBO data feed, for a business use case, can range from $5,000 to $10,000 per month.  

If you need real-time data, but can’t afford the NBBO or don’t require that level of quality, there are still top tier consolidated stock exchange solutions. In this category, we consider solutions with a consolidated tape of 12-20% of market volume. Nyse BQT, NASDAQ Basic, and CBO One Summary are the most common products you can purchase in this category, and it makes sense that these top tier solutions come from the three largest stock exchanges in the country, with the highest volume of trading activity. Similar to the NBBO or SIP product, these data feeds will also include an exchange fee, a technology fee, and a per user fee if you are displaying the data publicly to end users.  

This is the right market data solution for you if you are engaging in trading that is more fundamental and less systematic in nature, or if you are a well-funded or growth-stage fintech or software company that is building sophisticated tools for retail or professional investors. You will be able to push or pull this data into any trading application, software, website, or tool that you are using to display data to end users or make investment decisions. The total price for a top tier, high-volume SIP alternative can range from $2,000 to $3,500 per month. In many cases, these top tier market data solutions are still too expensive for most users. We consider mid tier consolidated stock exchange solutions to include anywhere from 3-12% market volume.  

The best data solutions

Intrinio and Polygon are two tech companies that have created solutions in this category. All solutions in this category include a technology fee for delivery of the data. Sometimes solutions in this category do include exchange and per user fees, but Intrinio has launched a revolutionary product called the “MX Feed” that weaves together pricing feeds from several exchanges that do not charge any exchange or per user fees. By weaving the prices together you end up with a high-volume pricing feed that can closely resemble the SIP NBBO, but that completely avoids the expensive fees that typically come along with a product of that quality.  

This makes products in this category great solutions for new projects inside of financial institutions that are being proven out, early stage fintech or software platforms and products, or investors and hedge funds that are getting started. It’s fast and straightforward to plug this data, via API or WebSocket, directly into your app, software, spreadsheet, or code. The total price for products in this category can range from $800 to $2,000 per month.

The last category includes “Single Exchange Solutions”. Data consumers can buy a pricing feed from a single exchange, which will only include pricing data from transactions that are happening on that single exchange. NASDAQ, Nyse, CBOE, Memx, IEX and many other exchanges offer these products on their own. These pricing feeds aren’t quite as helpful as top tier solutions or more creative and comprehensive products like Intrinio’s MX feed, but they can be good solutions when you are getting started or not in need of a high-volume feed. The total price for products in this category can range from $100 to $1,000 per month.

As you can see, there are a lot of different options for buying market data. It can be confusing, so we’ve summarized it on this chart for you. Choosing the right solution is a function of matching your need for quality and speed with your preferred delivery method and budget. You’ll start to notice that high quality and low latency solutions will be very expensive and need to be consumed in a specific streaming way. Mid quality and mid latency solutions will have more consumption options but can still be quite pricey. Lower quality and lower latency solutions will be extremely affordable.

Keep in mind that with whatever solution you choose, you will be required to file forms directly with the exchanges, make sure you are following the rules and regulations surrounding your particular solution, get set up with the correct technical specs, perform testing, and make sure your code is architected correctly to handle volumes of trades.  

This may feel like a lot, but tech companies like Intrinio exist specifically to help you navigate these complications and challenges. Whatever your mission is - building software, executing trades, or doing research - your focus should be on your business and not on navigating the complex world of data.  

To learn more about our financial services, reach out to our team today who can help you match your use case to the right market data solution. And if this content was helpful, please make sure to subscribe to our blog and YouTube channel for more fintech and financial data content.  

As we always like to say at Intrinio, once you get your hands on this data - we can’t wait to see what you build.

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