Rising trading volumes and price volatility are driving increased market data update volumes. Working with market data in the cloud provides the ability to adapt to surging information volumes.
- Big events in the 2020s are driving new records in market trading, volatility, and market data update volumes.
- For example, the OCC announced in early February that single-day total volume records were broken twice on two consecutive trading days in January.
- Working with market data in the cloud provides the agility to adapt to surging information volumes.
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Over the past two years, the global markets have been shaken by two significant events – the COVID-19 pandemic and the crisis in the Ukraine.
Many challenges have emerged out of these events for both companies and financial markets, such as supply chain fragility, rising interest rates and inflation, and potential disruption to global energy supplies.
As a result, the volume of market data updates hitting trading desks, as well as the middle and back office, is soaring. The year 2022 is young, but it has already seen record trading volumes at different venues across the globe.
Some key figures include:
- OCC, the world’s largest equity derivatives clearing organisation, announced in early February that single-day total volume records were broken twice on two consecutive trading days in January.
- The total combined volume at Cboe’s four options exchanges set a new single-day volume record on January 21, with 21.0 million contracts traded.
- Cboe also reported that total volume in S&P 500 Index (SPX) options was 36.5 million contracts in January, the highest monthly volume since March 2020. SPX options average daily volume for the month was 1.8 million contracts.
- In January, Tradeweb set a new average daily volume record in European government bond trading. European government bond average daily volume was up more than 22 percent year-on-year to $37bn.
- In late November 2021, the Cboe Volatility Index, or VIX, came close to reaching 29, sparked by the discovery of the Omicron variant. At that time, this had represented the highest weekly close since January 2021.
- Refinitiv saw multiple market data update daily records through January and February with some peaks 30 percent higher than typical and projected peaks.
With the global situation looking increasingly unsettled on multiple fronts – including increasing political, economic, and supply chain risks – it seems likely that large trading volumes, high volatility, and high levels of market data updates are set to continue.
Tackling the market data update volume challenge
In this complex and rapidly evolving environment, trading desks, the teams in the middle and back office, and market data executives face the challenge of ensuring their data infrastructure can keep up.
Traditionally, firms wanting to receive streaming market data relied on a chain of fixed hardware, including telephone lines, caching servers and business applications that engaged with the data on multiple servers and hops.
As market data update volumes increased, each link in this chain had to be manually upgraded to boost capacity. Market data teams often had to present business cases and obtain sign off for the spend.
This is both costly and not very agile, particularly when there are the kinds of surges in trading volumes and volatility that have taken place over the course of 2022 so far.
Moving real-time market data to the cloud has helped financial firms overcome this challenge.
Firms no longer need servers, switches and network telecoms in their own data centres. Instead, they are free to connect over a range of delivery options to source data from Refinitiv in Amazon Web Services (AWS).
One of those solutions is Refinitiv Real-Time – Optimized.
This all-trade, quote conflated solution is enabling clients to not only lower their total cost of ownership (TCO) but, crucially, is giving them the ability to swiftly tap into extra capacity.
They no longer need to spin up a large IT project and secure new capex funding to do so, which means they can quickly respond to changes in the markets or look to proactively seize an opportunity.
Connecting with agility in the cloud
Working with market data in the cloud provides a great deal of flexibility for firms today.
For example, Refinitiv clients running part or all of their Real-Time Distribution System enterprise platform in the cloud can move quickly, through configuration, to horizontally scale the number of sessions they are taking to consume data from Refinitiv Real-Time – Optimized.
Instead of a single pair of connections to Real-Time – Optimized, the client could increase that to two or three or more pairs of connections to share the load.
For clients running in AWS, this is as simple as connecting via AWS Private Link to those additional end points. For those outside of AWS, Refinitiv has a range of delivery options and continues to offer new options to suit different use cases and budgets.
In another example, a client may see some of their downstream consumer applications start to struggle with the increased market data update rates.
Again, through simple configuration in the Refinitiv Real-Time Distribution System, the client can create a new quality of service from the original Real-Time – Optimized stream that conflates data even further.
Updates could be as little as every 1 second, or every 30 seconds, depending on the downstream consumer needs. This is particularly practical for use cases such as web portals or sales team software.
A third example focuses on moving into new markets to proactively engage in fresh opportunities.
New markets require additional instrument capacity. If the current connections cannot accommodate that extra capacity, firms can start up a new connection and add that to the pool of capacity already running.
By working with market data in the cloud, firms can respond to the unprecedented market conditions of the 2020s with both speed and agility.
The cloud also supports flexibility which helps firms better manage their market data budget too – they can ensure sufficient capacity headroom is in place without too much spare capacity sitting dormant. That balancing act can save tens or even hundreds of thousands of dollars per month if done correctly for some firms.
In short, managing market data in the cloud enables firms to respond to challenges in an agile and cost-effective way.