Since the birth of electronic trading, financial firms have valued the competitive advantage provided by technologies that quickly access trading venues and deliver key market data feeds. As the industry has evolved, technological advances have radically hastened the speed of trading, with transactions now completed in milliseconds. This has raised the market data infrastructure stakes for firms, which now need low-latency data feeds and support for high-frequency transactions in order to stay competitive.
As they have in the past, capital markets firms can rely on their internal development teams to help them build out their market data environments. Yet the upfront costs and ongoing maintenance and support demands of a low-latency infrastructure are daunting, driving firms to consider an outsourced approach whereby a third-party provider hosts all or key components of a market data infrastructure.
There are a multitude of considerations for firms contemplating the market-data-as-a-service model. While firms will have to trust an external provider to deliver mission-critical services, they will remove the infrastructure build-out as a gating factor in getting to market faster with new trading strategies. Additionally, hosting offers firms a potentially broader range of data and connectivity services, and it shifts maintenance challenges to a third party.