Democratising market data in a changing era

As an inflation crisis spreads around the world, the Russia/Ukraine war affects global supply chains and energy prices, and the Covid-19 pandemic stretches into its third year, markets are changing swiftly. In this climate, greater access to market data has become essential for individuals and businesses to make better investment decisions, mitigate risks and capitalize on opportunities.

Market data has grown exponentially over the past decade as the technological capability to capture everything matures. At the same time, the number of market participants is increasing, including those that did not exist until five years ago, such as investors in crypto or environmental, social and governance frameworks.

These investors’ needs may differ slightly from those of traditional investors. Some of these new investors—which are cloud-based—are asking for lighter and simpler data that will benefit specific areas of their businesses, as opposed to paying a fortune for always-on, voluminous datafeeds or bundled services, of which they only use a fraction.

Riding the demand is CME Group, the world’s leading derivatives marketplace that enables clients to trade futures, options, cash and in over-the-counter markets, optimize portfolios and analyse data. In 2019, it launched data in Google Cloud—the industry’s first cloud solution for real-time market data—via the Google Cloud Platform, and has continued to upgrade this solution to cater to all kinds of market participants.

“As the market data offering continues to mature and grow, we believe having innovation in this space to connect with and help inform more market participants is important,” says David Gresky, global head of data sales at CME Group.

The derivatives exchange takes pride in CME Group’s constant innovation in trading products and the resulting data. Delivering valuable data via the cloud seems like a natural next step to better serve its customers, who have been calling for easier access.

“Our customers are not just trading on our marketplace. There are a lot of customers that need our data to help manage their risk, take in new businesses in various regions or generate research,” says Gresky. “Our solution provides an easier way to live stream data without deploying a large amount of infrastructure or justifying all the investments they make.”

Google Cloud offers an hourly fee data model for cloud-computing usage, and facilitates the use of real-time and delayed market data in the cloud at scale, securely
and efficiently.

Level playing field

From commodities trading to stock indexes to cryptocurrencies, investors are increasingly turning to cloud-based technology to access vital market information in a timely and cost-effective way. Firms that do not have access to the market, reference data and tools to support data management are in danger of
falling behind.

Large firms will no longer be the only ones with the resources and need to transition to the cloud. Fintech companies are taking advantage of the cloud to make an impact, and some are already proficient at it because no legacy systems are slowing them down.

Growing use-cases are proving the point. In April 2020, London-based crypto trading platform Skew—which was founded in 2018—announced the launch of its trade execution platform, leveraging data in Google Cloud to power its solution. The platform offers real-time analytics for spot, futures and options on cryptocurrencies, as well as access to block trade liquidity of CME‑listed bitcoin derivatives contracts in a regulatory-compliant format.

Like many other fintech companies, Skew builds and hosts its infrastructure in the cloud. Streaming market data would normally require implementing various low-level transport protocols and setting up expensive leased lines or colocation. However, CME Smart Stream has allowed the fintech start-up to easily stream Financial Information eXchange, or FIX, binary messages using standard cloud-native application programing interfaces (APIs), a more efficient and cost-effective approach.

CME Group also offers JavaScript Object Notation (JSON)-formatted futures and options data through Google Cloud, providing users an accurate look at buy and sell orders, and can easily be plugged into any existing application.

Another firm using data in Google Cloud is Brazilian start-up Grão Direto, the largest digital platform for grain trading in Latin America. The company—which serves small businesses and multinational grain trading companies—has developed an application that connects grain buyers and sellers, while offering a view of physical markets in real time. The easy access to CME’s market data from 2020 onwards has dramatically changed from the old days when producers had a comparatively opaque view of vital market information.

“The majority of crypto providers we are talking to did not exist five years ago, and they are brand new customers and cloud-based,” says Gresky. “We are not trying to solve a particular issue for one type of customer; we are trying to serve different types of customers, which in some cases we do not even know yet.”

Added urgency

The era of cloud computing has been blossoming for some years, but the current volatile market environment has added even greater urgency for market participants to obtain real-time data for more advanced analytics to find alpha and run models to back-test and manage risk.

“In today’s volatile market, loading real-time data in cloud (data lakes), then running fixed-income models on the data to generate alpha gives us a significant competitive advantage,” Ashish Dave, head of technology solutions group at PGIM Japan, said at a panel convened at June’s Tokyo Financial Information & Technology Summit (TFITS).

Ashish Majmundar, director at Google Cloud, concurred at the same panel, adding that “having real-time streaming data is very helpful when you start doing predictive modelling and looking at insights from that standpoint. We’ve been able to stitch together real-time, streaming and historical data in a single API. This enables the visualisation of candlestick bar charts or open-high-low-close views, which helps traders with their strategies.”

Financial institutional users also require consistent data across the front, middle and back offices. And they want access to the datafeed and the underlying information as quickly and efficiently as possible to power up their algorithmic trading, risk analysis and back-testing.

“Getting actionable insights from data is becoming a key differentiator in capital markets. You have a growing number of datasets without the ability to derive insights from it. This is a huge challenge,” said Majmundar at the TFITS. “There’s a need to have that data anytime, anywhere, in any format and on any device.”

Furthermore, the pandemic has kickstarted the shift to remote or hybrid working, increasing the need for more flexible market data access.

“Firms may be using the pandemic as an opportunity to take more control of their business, whereas, in the past, firms might say: ‘I’m not going to go to the data source. I just want to work with a data aggregator’,” says Gresky.

“But easy access to market data was going on its path regardless of the pandemic,” he adds.

Full-on cloud

CME announced in November 2021 that it would migrate all its technology infrastructure to Google Cloud, beginning with data and clearing services. The 10-year partnership will expand access, create real-time data and analytics capabilities, introduce new products and services, increase efficiency, and drive resilience in the financial market ecosystem.

“The launch of data in Google Cloud and some of the things we’ve done have given us confidence that this is achievable,” said Gresky.

Market participants, on the other hand, have raised several considerations—such as security, compliance and auditability issues—regarding the development of their cloud strategies, all pertinent to the highly regulated financial industry.

As a cloud provider, Google is confident of meeting a critical financial market infrastructure’s stringent performance and regulatory requirements, drawing from its massive consumer business experience. The tech giant has touted its built-in security strength and a global network with low‑latency capabilities.

The story of CME Group’s partnership with Google Cloud is still unfolding, and its grand goal of fulfilling the markets’ need for data is yet to come to a conclusion.

“Our solutions have stemmed from a thought leadership standpoint. We think this makes sense for our business because it’s something we need to find a way to embrace, learn about and be smart about what we deploy,” says Gresky. 

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