Expanding Retail Trading Volumes Are Driving a New Approach to Data Distribution and Licensing
- Retail trading volumes have exploded in the last year driven by working from home during the pandemic.
Retail trading volumes have exploded in the last year driven by working from home in the pandemic. Larry Tabb of Bloomberg research estimated that retail trading accounted for 23% of US equity trading in 2021 - up from 20% in 2020, and 10.1% in 2010. This is a global phenomenon and the demand is being met with new service delivery models including no-fee trading, which in turn is impacting the need for wider access to data and a proliferation of data sources. Over 90% of participants in a recent IPSX/QuantHouse/RHL webinar indicated the recent explosion in retail trading volumes and the move for more active trading strategies was here to stay.
In response, many brokers are having to expand their offerings and improve their infrastructure to stay competitive. The Contract for Difference (CFD) market continues to grow quickly as interest from retail investors outside
the United States creates a lift in demand for new instrument types. Clients expect their brokers to give them education around the instruments, as well as broad access to data to facilitate their trading. This drive to provide market data for consumers requires CFD brokers to interact with new data sources to deliver the service clients expect.
Getting access to the right data sources, the lifeblood of the CFD market, and putting the correct licenses in place is a complex business. Retail brokers have generally not had as much experience delivering data as their institutional counterparts and can run afoul of complicated usage requirements from a multitude of suppliers. Once signed up, ongoing management and monitoring of compliance require expertise and human resources beyond the scope of the existing headcount.
This increased demand from CFD brokers is also driving activity at the exchanges, who are constantly reviewing their licensing strategies, and moving away from flat-fee access as they see a licensing fee structure based on the workflow of brokers, rather than just distribution of market data. As these data licencing options for CFDs become more complex to understand and more sophisticated to administer, there are ever more potential pitfalls of breaching usage requirements on onward data redistribution. As we have seen, firms that break the rules, even inadvertently, can be subject to large fines and even lose access to the data, severely damaging their business models, competitive positions and reputations. This is no longer an uncommon occurrence.
CFD brokerages have choices as to where to get their data, and simplifying the complex sourcing and monitoring of these data feeds is a business imperative for this section of the market. Engaging expert subject matter data specialists, who can provide access to multiple data sources through a single platform with modern Cloud Cloud The cloud or cloud computing helps provides data and applications that can be accessed from nearly any location in the world so long as a stable Internet connection exists. Categorized into three cloud services, cloud computing is segmented into Software as a Service (SaaS), Infrastructure as a Service (IaaS), and Platform as a Service (PaaS). In terms of trading, the versatility of the cloud service allows retail traders the ability to test out new trading strategies, backtest pre-existing concepts performing run time series analysis (or trend analysis), and execute trades in real-time.Advantages of Cloud Computing in TradingAn advantage that stems from cloud computing would be that entities don’t need to construct a data center infrastructure themselves.Instead, entities can conduct trials and perform refinements, and should no solutions pan out then the cloud may be shut down while the payment terminated at the same time. This methodology of renting virtual space and time in cloud tends to be far more appealing than the costs, time, and resources required with constructing hardware and software infrastructures.These also happen to be the exact concept used in SaaS with trading related software.While executing trades via the cloud is an important capability to keep intact, most retail traders are drawn to the cloud for the research, backtesting, and analytics advantages that stem from using the cloud. In forex, traders that use Expert Advisors (EAs) and automated trading software are uploading their solutions onto a broker’s cloud account. The cloud is an ecosystem for multiple industries, sectors, and niches. Its versatility has not been peaked while in trading many retail traders are transitioning to cloud computing as a means to reduce expenditures, optimize efficiency, and maximize available resources. The cloud or cloud computing helps provides data and applications that can be accessed from nearly any location in the world so long as a stable Internet connection exists. Categorized into three cloud services, cloud computing is segmented into Software as a Service (SaaS), Infrastructure as a Service (IaaS), and Platform as a Service (PaaS). In terms of trading, the versatility of the cloud service allows retail traders the ability to test out new trading strategies, backtest pre-existing concepts performing run time series analysis (or trend analysis), and execute trades in real-time.Advantages of Cloud Computing in TradingAn advantage that stems from cloud computing would be that entities don’t need to construct a data center infrastructure themselves.Instead, entities can conduct trials and perform refinements, and should no solutions pan out then the cloud may be shut down while the payment terminated at the same time. This methodology of renting virtual space and time in cloud tends to be far more appealing than the costs, time, and resources required with constructing hardware and software infrastructures.These also happen to be the exact concept used in SaaS with trading related software.While executing trades via the cloud is an important capability to keep intact, most retail traders are drawn to the cloud for the research, backtesting, and analytics advantages that stem from using the cloud. In forex, traders that use Expert Advisors (EAs) and automated trading software are uploading their solutions onto a broker’s cloud account. The cloud is an ecosystem for multiple industries, sectors, and niches. Its versatility has not been peaked while in trading many retail traders are transitioning to cloud computing as a means to reduce expenditures, optimize efficiency, and maximize available resources. Read this Term-based architecture, is a core need for those brokers wanting to serve their clients with licensed information and ensure good governance. This is particularly powerful when combined with an active approach to monitoring ongoing license usage and requirements, allowing firms to mitigate any potential liabilities from Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectively relevant with real-time pricing.Depending upon where you reside, an exchange may be referred to as a bourse or a share exchange while, as a whole, exchanges are present within the majority of countries. Who is Listed on an Exchange?As trading continues to transition more to electronic exchanges, transactions become more dispersed through varying exchanges. This in turn has caused a surge in the implementation of trading algorithms and high-frequency trading applications. In order for a company to be listed on a stock exchange for example, a company must divulge information such as minimum capital requirements, audited earnings reports, and financial reports.Not all exchanges are created equally, with some outperforming other exchanges significantly. The most high-profile exchanges to date include the New York Stock Exchange (NYSE), the Tokyo Stock Exchange (TSE), the London Stock Exchange (LSE), and the Nasdaq. Outside of trading, a stock exchange may be used by companies aiming to raise capital, this is most commonly seen in the form of initial public offerings (IPOs).Exchanges can now handle other asset classes, given the rise of cryptocurrencies as a more popularized form of trading. An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectively relevant with real-time pricing.Depending upon where you reside, an exchange may be referred to as a bourse or a share exchange while, as a whole, exchanges are present within the majority of countries. Who is Listed on an Exchange?As trading continues to transition more to electronic exchanges, transactions become more dispersed through varying exchanges. This in turn has caused a surge in the implementation of trading algorithms and high-frequency trading applications. In order for a company to be listed on a stock exchange for example, a company must divulge information such as minimum capital requirements, audited earnings reports, and financial reports.Not all exchanges are created equally, with some outperforming other exchanges significantly. The most high-profile exchanges to date include the New York Stock Exchange (NYSE), the Tokyo Stock Exchange (TSE), the London Stock Exchange (LSE), and the Nasdaq. Outside of trading, a stock exchange may be used by companies aiming to raise capital, this is most commonly seen in the form of initial public offerings (IPOs).Exchanges can now handle other asset classes, given the rise of cryptocurrencies as a more popularized form of trading. Read this Term data misuse and essentially outsource this potentially difficult task.
Specialist firms can audit brokerages’ current data licensing agreements and optimise them from a cost and risk perspective, ultimately playing the role of a trusted advisor to firms looking to navigate complicated market data policies and fee structures.
CFDs are without doubt complex instruments but common licencing mistakes can be avoided. A combination of technological expertise in data delivery and deep experience in data licensing structures will prove a powerful tool helping the industry keep up with expanding retail demands.
Rafah Hanna is a Director, RHL
Retail trading volumes have exploded in the last year driven by working from home in the pandemic. Larry Tabb of Bloomberg research estimated that retail trading accounted for 23% of US equity trading in 2021 - up from 20% in 2020, and 10.1% in 2010. This is a global phenomenon and the demand is being met with new service delivery models including no-fee trading, which in turn is impacting the need for wider access to data and a proliferation of data sources. Over 90% of participants in a recent IPSX/QuantHouse/RHL webinar indicated the recent explosion in retail trading volumes and the move for more active trading strategies was here to stay.
In response, many brokers are having to expand their offerings and improve their infrastructure to stay competitive. The Contract for Difference (CFD) market continues to grow quickly as interest from retail investors outside
the United States creates a lift in demand for new instrument types. Clients expect their brokers to give them education around the instruments, as well as broad access to data to facilitate their trading. This drive to provide market data for consumers requires CFD brokers to interact with new data sources to deliver the service clients expect.
Getting access to the right data sources, the lifeblood of the CFD market, and putting the correct licenses in place is a complex business. Retail brokers have generally not had as much experience delivering data as their institutional counterparts and can run afoul of complicated usage requirements from a multitude of suppliers. Once signed up, ongoing management and monitoring of compliance require expertise and human resources beyond the scope of the existing headcount.
This increased demand from CFD brokers is also driving activity at the exchanges, who are constantly reviewing their licensing strategies, and moving away from flat-fee access as they see a licensing fee structure based on the workflow of brokers, rather than just distribution of market data. As these data licencing options for CFDs become more complex to understand and more sophisticated to administer, there are ever more potential pitfalls of breaching usage requirements on onward data redistribution. As we have seen, firms that break the rules, even inadvertently, can be subject to large fines and even lose access to the data, severely damaging their business models, competitive positions and reputations. This is no longer an uncommon occurrence.
CFD brokerages have choices as to where to get their data, and simplifying the complex sourcing and monitoring of these data feeds is a business imperative for this section of the market. Engaging expert subject matter data specialists, who can provide access to multiple data sources through a single platform with modern Cloud Cloud The cloud or cloud computing helps provides data and applications that can be accessed from nearly any location in the world so long as a stable Internet connection exists. Categorized into three cloud services, cloud computing is segmented into Software as a Service (SaaS), Infrastructure as a Service (IaaS), and Platform as a Service (PaaS). In terms of trading, the versatility of the cloud service allows retail traders the ability to test out new trading strategies, backtest pre-existing concepts performing run time series analysis (or trend analysis), and execute trades in real-time.Advantages of Cloud Computing in TradingAn advantage that stems from cloud computing would be that entities don’t need to construct a data center infrastructure themselves.Instead, entities can conduct trials and perform refinements, and should no solutions pan out then the cloud may be shut down while the payment terminated at the same time. This methodology of renting virtual space and time in cloud tends to be far more appealing than the costs, time, and resources required with constructing hardware and software infrastructures.These also happen to be the exact concept used in SaaS with trading related software.While executing trades via the cloud is an important capability to keep intact, most retail traders are drawn to the cloud for the research, backtesting, and analytics advantages that stem from using the cloud. In forex, traders that use Expert Advisors (EAs) and automated trading software are uploading their solutions onto a broker’s cloud account. The cloud is an ecosystem for multiple industries, sectors, and niches. Its versatility has not been peaked while in trading many retail traders are transitioning to cloud computing as a means to reduce expenditures, optimize efficiency, and maximize available resources. The cloud or cloud computing helps provides data and applications that can be accessed from nearly any location in the world so long as a stable Internet connection exists. Categorized into three cloud services, cloud computing is segmented into Software as a Service (SaaS), Infrastructure as a Service (IaaS), and Platform as a Service (PaaS). In terms of trading, the versatility of the cloud service allows retail traders the ability to test out new trading strategies, backtest pre-existing concepts performing run time series analysis (or trend analysis), and execute trades in real-time.Advantages of Cloud Computing in TradingAn advantage that stems from cloud computing would be that entities don’t need to construct a data center infrastructure themselves.Instead, entities can conduct trials and perform refinements, and should no solutions pan out then the cloud may be shut down while the payment terminated at the same time. This methodology of renting virtual space and time in cloud tends to be far more appealing than the costs, time, and resources required with constructing hardware and software infrastructures.These also happen to be the exact concept used in SaaS with trading related software.While executing trades via the cloud is an important capability to keep intact, most retail traders are drawn to the cloud for the research, backtesting, and analytics advantages that stem from using the cloud. In forex, traders that use Expert Advisors (EAs) and automated trading software are uploading their solutions onto a broker’s cloud account. The cloud is an ecosystem for multiple industries, sectors, and niches. Its versatility has not been peaked while in trading many retail traders are transitioning to cloud computing as a means to reduce expenditures, optimize efficiency, and maximize available resources. Read this Term-based architecture, is a core need for those brokers wanting to serve their clients with licensed information and ensure good governance. This is particularly powerful when combined with an active approach to monitoring ongoing license usage and requirements, allowing firms to mitigate any potential liabilities from Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectively relevant with real-time pricing.Depending upon where you reside, an exchange may be referred to as a bourse or a share exchange while, as a whole, exchanges are present within the majority of countries. Who is Listed on an Exchange?As trading continues to transition more to electronic exchanges, transactions become more dispersed through varying exchanges. This in turn has caused a surge in the implementation of trading algorithms and high-frequency trading applications. In order for a company to be listed on a stock exchange for example, a company must divulge information such as minimum capital requirements, audited earnings reports, and financial reports.Not all exchanges are created equally, with some outperforming other exchanges significantly. The most high-profile exchanges to date include the New York Stock Exchange (NYSE), the Tokyo Stock Exchange (TSE), the London Stock Exchange (LSE), and the Nasdaq. Outside of trading, a stock exchange may be used by companies aiming to raise capital, this is most commonly seen in the form of initial public offerings (IPOs).Exchanges can now handle other asset classes, given the rise of cryptocurrencies as a more popularized form of trading. An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectively relevant with real-time pricing.Depending upon where you reside, an exchange may be referred to as a bourse or a share exchange while, as a whole, exchanges are present within the majority of countries. Who is Listed on an Exchange?As trading continues to transition more to electronic exchanges, transactions become more dispersed through varying exchanges. This in turn has caused a surge in the implementation of trading algorithms and high-frequency trading applications. In order for a company to be listed on a stock exchange for example, a company must divulge information such as minimum capital requirements, audited earnings reports, and financial reports.Not all exchanges are created equally, with some outperforming other exchanges significantly. The most high-profile exchanges to date include the New York Stock Exchange (NYSE), the Tokyo Stock Exchange (TSE), the London Stock Exchange (LSE), and the Nasdaq. Outside of trading, a stock exchange may be used by companies aiming to raise capital, this is most commonly seen in the form of initial public offerings (IPOs).Exchanges can now handle other asset classes, given the rise of cryptocurrencies as a more popularized form of trading. Read this Term data misuse and essentially outsource this potentially difficult task.
Specialist firms can audit brokerages’ current data licensing agreements and optimise them from a cost and risk perspective, ultimately playing the role of a trusted advisor to firms looking to navigate complicated market data policies and fee structures.
CFDs are without doubt complex instruments but common licencing mistakes can be avoided. A combination of technological expertise in data delivery and deep experience in data licensing structures will prove a powerful tool helping the industry keep up with expanding retail demands.
Rafah Hanna is a Director, RHL