Why Market Data Monitoring is the cornerstone of data quality

Key takeaways 

  • Data underpins the financial markets and monitoring data quality is vital for businesses to conduct trading and stay competitive. 
  • Market takers, data providers, and exchanges require market data monitoring (MDM) to guarantee data accuracy and minimize feed latency. 
  • To learn more about the latest market data trends and how to overcome the current challenges of maintaining data quality, download the whitepaper from GreySpark Partners and ITRS. 

Banks, brokerages, exchanges, and market data providers must ensure they use or distribute only the best quality data to maintain their competitive advantage. Top quality data fuels better trading decisions, improves trust in data providers’ services, and protects the reputation of exchanges publishing prices. 

Market feed accuracy and latency are the two biggest factors that influence data quality. Being able to measure these factors across the vast range of available data sources – which typically output large volumes of data at high frequency – is a massive but essential undertaking.  

This is where market data monitoring (MDM) comes into play. 

Why Market Data Monitoring matters across the trading ecosystem  

Due to the increasingly digitized trading ecosystem that has evolved in the last decade, MDM has become integral to the financial markets. Trading is now conducted via largely automated, AI-powered algorithms which rely on a wide array of high-volume, high-frequency market data feeds to function.  

Continually monitoring the latency of these market feeds and the frequency of their updates is vital for guaranteeing data quality. MDM enables financial firms to observe feed latency and troubleshoot issues that push it above acceptable levels. It also allows firms to see how frequently data sources are updated, making certain the ones they use are the most accurate.  

For market takers, MDM enables them to make highly informed trading decisions, minimize the value at risk of their trading portfolio, and prevent stale data from affecting P&L. For instance, if a brokerage relies on feeds with high latency, it could lose out to competitors offering more up-to-date and accurate prices that buyers might find more attractive. A brokerage will also suffer reputational damage if a trader cannot execute at their intended price because of latent or inaccurate market feeds.  

Market data providers, meanwhile, can improve their services and strengthen customer partnerships through using MDM. Robust MDM gives providers the means to proactively pinpoint latency surges, then rapidly adjust their operations accordingly. By seamlessly transmitting accurate data that supports their customers’ fast-paced business, market data providers can deliver a reliable service and nurture trust with their customers.   

Exchanges also stand to gain a competitive advantage from MDM. Their reputation depends on their ability to swiftly and continually publish top quality data that informs trading. Failure to do so could prompt buyers and sellers to switch to rival exchanges which supply more accurate and reliable information. 

Data quality is therefore critical to many businesses in the financial markets, so what are the common challenges firms face with maintaining it?  

How to overcome accuracy and latency challenges with Market Data Monitoring 

Trading is high stakes, fast-paced, and reliant on the real-time calculation and distribution of data, making market feed accuracy and latency key elements of data quality. Financial firms can encounter issues with maintaining these elements, including:  

1.  Drops in update frequency  

If the update frequency of a data source falls, financial firms risk making calculations or decisions based on stale data. MDM gives them visibility of how frequently a data source or market feed is updated. MDM solutions can also compare different sources or feeds, identify which ones are more frequently updated, and automatically select the best to use.  

2.  High latency  

Financial firms must understand the latency of market feeds to make sure they use the most recent and accurate data. Research also suggests the value of a one-millisecond improvement to the latency of every trade amounts to $100 million per year. Since the latency of market data feeds contributes to the overall turnaround time of a trade, the ability to monitor latency has major financial significance. MDM enables financial firms to set latency benchmarks and proactively address issues that could increase latency.  

3.  Data anomalies  

Financial firms often collate large volumes of data from many sources, but they need to stay vigilant for any data anomalies that can impact their business. Automated MDM solutions assist with this by rapidly analyzing incoming data and detecting anomalies. For example, a financial firm could set a benchmark for prices and any spikes that exceed this benchmark would then be flagged as a data anomaly.  

With MDM, financial firms can keep their fingers on the pulse of the financial markets. They can proactively monitor the accuracy and latency of market feeds to guarantee they tap the best quality data for their business.  

For further insights on the importance of MDM, download the whitepaper from GreySpark Partners and ITRS.