Golden Insights: Who’s winning you or your competitors

Data is the New GOLD

“Data is the new gold,” has become a prominent adage in the capital markets world and across most innovative industries. The truth of the matter is that with higher quality data, more diverse data sources, and a better understanding of data generated, the more a firm is positioned to grow. Whether you’re a trading venue like Nasdaq, a bank like TD, or a data provider like Refinitiv, a solid foundational core of organized information is what will drive innovation for your firm. However, high volumes of data does not necessarily translate to higher profits. The data has to be sourced correctly, normalized, and made easily accessible through the underlying data technologies delivering the content. To realize profits, all this must be ensured in a way that does not inflate IT costs.

For example, studies show that data scientists spend ~80% of their time collecting and organizing data. In essence, these mathematical experts are paid high wages simply sourcing and formatting the tables they work with, not because they want to but because that is a necessity for them to do their work within most firms. Imagine how much more effective and fulfilled your firm’s data scientists would be if the data they are using is already organized and readily available. These experts within your firm will instead be able to leverage most of their time analyzing, interpreting, and deriving actionable insights, the very work they specialize in.

Data preparation accounts for about 80% of the work of data scientists
Data preparation accounts for about 80% of the work of data scientists

In addition, financial firms can grow at an unprecedented pace simply by optimizing the firm’s data infrastructure. According to the Computer Economics’ 2019 IT Spending and Staffing Benchmarks study, financial services spend significantly more on information technology as a ratio of the company’s entire revenue compared to all other measured sectors such as manufacturing, high tech, retail, and healthcare. The study provides the 25th and 75th percentiles of IT spend per sector to give results that exclude outliers. The 25th percentile of financial service firms spend 4.4% of their total revenue on their IT programs while the 75th percentile spend 11.4% of their revenue. Compare this with the healthcare sector, which occupies the second highest spending ratios behind financial services and the numbers show the 25th percentile of healthcare firms only spends 3% of revenue on IT and the 75th percentile of firms spends 5.9% on revenue. All this is to say that financial firms invest heavily into information technology for maintaining and growing their business more so than other sectors. This means any financial firm that can get faster and more efficient results from the same IT spend is poised to surpass their competitors.

Building a core of big data technologies to provide robust, instantaneous queries on data at-scale is the goal all IT teams strive for in the modern age. At TickSmith, we’ve developed our Market Insights product to achieve this and the platform speaks for itself. Our product is a comprehensive portal providing all data-centric functionality in the public Canadian equity markets for clients ranging from banks to regulators and data providers to stock exchanges.

3 Ways Data can be Leveraged within Capital Markets

In this section, we’ll outline 3 different use cases where exchanges, traders, and regulators can make use of market data and analytics to derive greater value.

1 | Trading venues or stock exchanges can use the data to evaluate their performance against competitors

A trading venue or stock exchange can use data to evaluate their performance against competitors and prove that they provide adequate liquidity to constituent brokers. Market makers can also use this same data and comparative metrics like percent of time at the best quotes, for example, to determine how close they are to the best spreads among all other traders in the market on a ticker-by-ticker basis.

2 | A hedge fund manager or algorithmic trader can generate alpha by joining alternative datasets to public market data

A hedge fund manager or algorithmic trader can generate alpha by joining alternative datasets to public market data. By comparing different and novel sets, they are able to derive previously unknown insights in the markets. Additionally, they can use the granular data to feed into backtesting environments, conduct transaction cost analytics (TCA), and run experimental machine learning algorithms.

3 | A market surveillance team within a bank can use data to examine point in time order entries

A market surveillance team within a bank can use data to examine point in time order entries. They are able to analyze market data to determine spoofing, wash trades, fraudulent activities, and even the event-by-event causes of electronic flash crashes in the markets. Academics can also access the data programmatically to extract insights from granular market activity for their research.

Market Insights covers all these use-cases with one simple platform access. With one login credential, users have access to query and download granular full market depth data for all thirteen major Canadian equity destinations including Nasdaq Canada, Toronto Stock Exchange, MatchNow Dark Pool, and Omega ATS venues to name a few. Historic data is available from the current day back to January 2016 and users are able to extract any range of available data within milliseconds. This data is magnitudes greater than any top of book best quote data from other data providers and guaranteed at a much lower price point as well.

Market Insights Solution Highlights

Advanced Analytics

Since 2019, Nasdaq has been using Market Insights to compare the performance of their venues with competitors in Canada. With Market Insights, Nasdaq is able to better understand nuanced market interactions and where the strengths of their trading engine are. Market Insights has an entire suite of metrics that measures the performance of each trading venue or broker for any and all tickers. The metrics range from the percentages of when each firm has the best prices across every ticker to the liquidity rankings of different trading venues.

Advanced Analytics

Book Replay

Regulators and trade surveillance teams can query the entire limit order book with a fast average response time of half a second. For comparison, other tools that capture order-by-order granularity of the entire Canadian equities market takes several hours per response. With the Book Replay tool, investigators are better able to pinpoint fraudulent activity and visualize the underlying cause of irregular market activity on a millisecond basis. Additionally, the Book Replay tool can be used as a post-trade analysis support tool and firms such as National Bank of Canada are currently leveraging our technology to conduct this analysis.

Point-in-time Book Replay view of the Shopify ticker
Point-in-time Book Replay view of the Shopify ticker

Top-of-Book Data

 For a more traditional view on the best prices per each stock, users may use the generated Top of Book dataset to run their analysis. All bid and ask quotes for every Canadian ticker is made available to view on the screen or to export as a file onto your browser. This dataset is frequently used to inform trading strategies and give users an easily digestible level 1 view of the direction a market is heading at any given time.

Time-series Top of Book data displaying the best quotes and executions during a time range
Time-series Top of Book data displaying the best quotes and executions during a time range

Plug & Play with APIs

For automated and programmatic access to the data, firms can use the Market Insight REST and Python APIs for easy immediate results. Using the API accesses, users are able to query specific parts of the data they want and download any entire day’s worth of data as files. When querying data, users can also specify filters such as the dataset they want to see combined with trading venue, ticker, and trade time parameters. Market Insights is a completely open and transparent platform so users can extract the data and plug the data into other systems off-platform to conduct internal analysis proprietary to the user’s firm with maximum security.

Leveraging Python libraries to chart Top-of-Book data on the user’s environment
Leveraging Python libraries to chart Top-of-Book data on the user’s environment

TickSmith is laser focused on building our product set for the next generation of financial firms. Book a demo of the Market Insights product below and you can receive a trial account to see if the platform fits your data needs.

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