Max Bowie: Data ‘Sandboxes’: Learning Through Play

If your role involves market data and technology, you’ve probably heard a lot about sandboxes lately. Not to be confused with the type of sandbox that one of my childhood friends had in his garden, where all the kids would share their toys—basically experimenting with new textures and activities—and which eventually became an overgrown king-size litter box for the neighbor’s cat, today’s data sandboxes share the same philosophy of experimentation through plug-and-play. Organizations create environments designed to nurture innovation, where developers have access to everything they need to create next-generation data services, from easily accessible datasets to connectivity and hosting, all generally at preferential rates or entirely free of charge. 

Then there are also initiatives like the aptly named FinTech Sandbox or New York Fintech Innovation Lab, which offer a formal program of subsidized services and structured mentoring by experienced fintech executives. For example, web services data provider Xignite is providing application programming interfaces (APIs) for accessing market data free of charge to nine FinTech Sandbox participant startups, three of which demonstrated solutions leveraging Xignite’s data at last week’s FinTech Sandbox Demo Day.

“A lot of developers coming out of school don’t really know the financial industry, and data is expensive. So the idea of sandbox initiatives is to reduce friction and provide data, and so on, free of charge for six months for testing,” says Dinesh Chheda, advisory board member and data executive in residence at FinTech Sandbox.

Old and New, Alike

But sandboxes aren’t just for complete newcomers: Swedish market data vendor Millistream has launched its Millistream Sandbox, a test environment that allows clients to experiment with delayed data from its products in an unashamed attempt to get them “hooked” on Millistream’s data and delivery mechanisms. 

“The idea of sandbox initiatives is to reduce friction and provide data … free of charge for six months for testing.” Dinesh Chheda, FinTech Sandbox

Because Millistream does not require Sandbox users to sign contracts, users are not restricted to how they can use the data within the broad condition that it be used for testing purposes, or for how long they must subscribe. So if the client tests something that doesn’t work out, they can move on and try out something else without having to continue paying for something they no longer use.

The participation of vendors and founder sponsors who are willing to subsidize—or eat entirely—the cost of market data is key. It legitimizes the model of free or affordable tiers of data delivery, and points the way to a more flexible model for data licensing—and importantly, flexible yet standardized, so that it ultimately becomes easier to gain buy-in for new models from across the industry.

More often than not, exchanges are cast as the bad guys of data licensing and fees. However, some exchanges, like Deutsche Börse, are already taking it on themselves to support the next wave of financial technology and data newcomers, using their extensive infrastructures and datacenters to host and support startups with limited resources, and to help them connect—both in terms of data connectivity and from a business partner perspective—with other data sources and service providers.

The enormity of the task facing financial firms to not just update their infrastructures and applications, but implement the requisite architecture to support true data-as-a-service delivery means that, as Chheda says, firms will need to enlist those innovative startups—in which case, the spirit of innovation and the fee tiers that support it may become more pervasive, more standardized, more accepted, and more common across other areas of business, perhaps ultimately enabling truly open, plug-and-play and pay-as-you-go data platforms, which is what consumers have been requesting for a long time. 

So if you want to change the way the industry pays for data, play on!