Skip to content

U.S. options data breakdowns challenge trading desks

Rob Lane
Rob Lane
Global Head of Business Execution, Low Latency, LSEG

As a result of the recent surge in U.S. options trading, many firms are struggling to obtain correct, timely data. This data is required for a wide range of options trading use cases across these firms. How can firms attain the data they require?

  1. Surging U.S. options trading volumes is leading to a data crisis, as firms receive incorrect, incomplete, or non-timely data.
  2. Firms use options data to meet a wide variety of use cases, and so more than one data solution may be needed
  3. Refinitiv provides a wide range of high-quality U.S. options data sources, from raw exchange feeds and OPRA data to normalised and enriched historical tick data.

For more data-driven insights in your Inbox, subscribe to the Refinitiv Perspectives weekly newsletter.

U.S. options trading is continuing to increase dramatically around the globe, creating a series of data challenges for trading operations.

In some cases, trading desks are not receiving the high quality and timely data they contracted for. In other cases, firms are having difficulty ingesting and storing these huge quantities of options trade data in their on-premises servers.

As a result, many financial firms may need to take a new strategic approach to managing their options data.

Refinitiv Market Data feeds – harmonised coverage and completeness of data, supporting your uses cases, from algo and high frequency trading to back-testing and performance analytics

Spiralling data volumes

These data challenges are being driven by a surge in U.S. options trading over the past few years.

Options trading volumes soared 32.2 percent to a record 9.87 billion contracts in 2021, data from Options Clearing Corp showed, according to Reuters News. That was also double 2019’s total, which was also a record.

So far in 2022, 5.84 billion contracts have traded. This surge has been driven by the use of options by retail investors, although now professional investors are also trading more options, to capture the investment gains themselves.

Compounding the situation is the fact that an options trade contains many more data fields than a straight equity trade because they are more complex instruments.

Information can include the contract month, the strike price, the settlement price, the theoretical price, days until maturity, the name of the underlying security, and more. This means that as options trades grow, the data demands increase much more rapidly.

These data volume issues are creating leaky data pipes for some firms; metaphorically, the data is making the ‘pipes burst’. This issue can result in firms not being able to trade with confidence – or at all. This sizeable operational risk can evolve into even more damaging market risk, if firms get caught on the wrong side of a trade, or are unable to trade for a client.

Reconsidering data possibilities

Trading desks that are facing the U.S. options data challenge need to rethink their market data strategy. This could involve engaging with different types of market data feeds and historical data, on their own or in combination.

Requirements will depend on the specific use case, or cases, that the trading desk is seeking to apply, such as:

  • Back testing and pre-trade analytics – assessing algorithms and performing best execution analytics
  • Price discovery – following accurate price movements to ensure the best trades
  • Automated & algorithmic trading – deploying exchange data for technology-based trading approaches
  • Smart order routing – ensuring the trading desk is transacting at the best venue, at the best price
  • Compliance – for example, making sure that trades meet the best execution requirements.

Trading desks and the middle and back office teams that support them may need to use more than one data option to ensure all of the relevant use cases are met.

Watch: MayStreet and LSEG – Unmatched data quality across the latency spectrum

Choosing new data sources

Refinitiv recognises the options market data challenge that confronts firms, and that each organisation will have its own mix of requirements. So, Refinitiv provides a variety of options and data solutions to enable firms to meet their needs flexibly. These include:

  1. Ultra-low latency – For the most latency sensitive use cases, requiring access to normalised Level 1, 2, and 3 data, and BBO/NBBO data from exchanges, Refinitiv can offer Real-Time – Ultra Direct.
    This solution is an in-process feed handler for OPRA and each of the U.S. options exchange direct feeds. It provides users with a very flexible data solution for trading, research, latency monitoring and compliance.
  2. Low latency – The second possibility is Real-Time – Direct OPRA, which is particularly useful for back testing, predictive analytics, and smart order routing. This U.S. options market data feed – delivered as a fully hosted managed service – covers the entirety of U.S. options real-time data, delivered in a low latency, 1-2 millisecond platform. It gives trading desks the ability to consume all OPRA trades and quotes with confidence, as it’s not conflated or delayed.
    Refinitiv’s Real-Time – Direct OPRA solution handles the largest real time market data set in the world flawlessly, processing an all-time peak of 80+ million messages per second in June 2022 without dropping a single tick.
    In May 2022, our OPRA direct feed handled OPRA’s all-time peak daily message rate of 156 billion messages in a day without a single service issue. Our capacity planning for the direct feed gives us headroom to process increased forecasted message rates reliably at low latencies for years to come.
  3. Non-latency sensitive – For non-latency sensitive use cases where value-added data is required, Refinitiv Real-Time – Full Tick and Refinitiv Real-Time – Optimized are potential solutions.
    Real-Time – Full Tick delivers tick-by-tick OPRA market data, collected at source, and then normalised to a consistent symbology and data model – with Refinitiv proprietary data fields added to compliment the venue data – before being distributed over a world-class network to a firm’s on-premises location, co-lo or cloud provider of choice.
    Real-Time – Optimized provides a consolidated OPRA feed for the top-of-book of each U.S. options exchange, and the NBBO, in a conflated two-second format from the cloud.
    These solutions are particularly good for use cases requiring value-add data that needs to be flexibly retrieved by any premises or via the cloud.
  4. Raw historical data – For historical data captured in a PCAP format at the exchange primary or secondary data centre, Refinitiv now offers Tick History – PCAP.
    This provides ultra-high quality market data that is GPS time-stamped to nanosecond granularity. Data for OPRA and the direct feeds of each U.S. options exchange are available in a raw PCAP format or normalised and formatted in Parquet, CSV or JSON. It supports use cases such as historical analysis, back-testing, and transaction cost analysis.
  5. Enriched historical data – An instant source of historical data is available from Refinitiv Tick History, in the cloud. Data is normalised and enriched with Refinitiv reference data, and sits within the Refinitiv data model.
    Refinitiv Tick History – Query enables quants and traders to work with Tick History data in the cloud, using Google BigQuery analytics. This combination transforms a query that would take hours or days of preparation and run-time into just minutes.

In short, having robust options data is a non-negotiable essential for trading desks and the risk, compliance and back office teams that support them. Firms may need to take the current options market data challenges into account when considering their strategies for U.S. options – they need to be able to trust that the data they are receiving is correct and complete.

Refinitiv Market Data feeds – harmonised coverage and completeness of data, supporting your uses cases, from algo and high frequency trading to back-testing and performance analytics


How can financial firms attain the data they require?

Trading desks that are facing the U.S. options data challenge need to rethink their market data strategy.