Opening Cross: An Intensifying ITCH—Will You Scratch It, Or Let It Spread?

Nasdaq OMX’s proprietary ITCH data protocol has become something of a de facto standard for equities data dissemination in recent years, with more marketplaces adopting the protocol or ITCH-like alternatives. But will widespread adoption support simpler and more efficient access to markets worldwide, or could this ITCH ultimately become an irritant?
The spread of ITCH is in part due to the rash of exchanges adopting Nasdaq OMX’s Genium Inet and X-stream Inet trading platforms and its associated bells and whistles—a result of legacy exchange trading platform vendors like EFA and Computershare being subsumed into OMX and ultimately Nasdaq like a huge snowball, growing as it rolls downhill. For small or emerging market exchanges without huge internal IT resources, the platform represents a way to not only roll out a modern and full-functioning platform to attract participation from firms who expect these capabilities, but also to adopt standards that make it easier for participants to connect to an exchange’s data and interact with its markets.
ITCH’s use isn’t just limited to those exchanges: As Nasdaq’s use across its equities and options marketplaces shows, the protocol ably supports large, high-volume and high-frequency markets—a key reason why Canadian exchange CNSX Markets is considering ITCH for its Canadian Securities Exchange and Pure Trading ATS. CNSX already uses Nasdaq’s X-stream Inet platform, but uses the FIX Protocol to distribute market data.
CNSX chief executive Richard Carleton says FIX’s “greater richness” will continue to be useful to some firms, but ITCH consumes less bandwidth, making it suitable for the data needs of low-latency and algorithmic traders and market makers.
Meanwhile, Nasdaq plans to roll out an ITCH feed for data from its eSpeed fixed income market (acquired from interdealer broker BGC Partners) this year, to provide lower latency, better performance and the ability to carry full depth data, though Nasdaq will continue to support eSpeed’s existing Multicast and API feeds.
According to Nasdaq, eSpeed ITCH messages offer more detail, making it easier for traders to perform microstructure analysis and identify trading opportunities, while it will also provide a retransmission and recovery mechanism, which is not available on the current eSpeed Multicast feed. In addition, standardizing on ITCH will allow clients that already use it for other markets to reduce development and maintenance requirements.
The fact that ITCH can be used for asset classes beyond equities holds great promise—not just the potential for a single data standard, but that it might also provide a bandwidth-efficient data distribution protocol for high-volume datasets, such as options. With exchanges dropping the FIX-based FAST Protocol like a hot potato after a infringement lawsuit, the industry has lacked an alternative standard, and exchanges have instead adopted proprietary data formats. But while during the lawsuit market participants claimed to be no longer bothered by the options data volumes that prompted the invention of FAST, and that modern network technologies had surpassed the bandwidth limitations, there’s no denying that options data rates are still rising.
The Options Price Reporting Authority’s consolidated feed is projected to require bandwidth for almost 23 million messages per second by July, rising to more than 29 million by January 2016. However, S&P Capital IQ predicts that OPRA data could hit 120 mps by 2020, and has FPGA-accelerated its QuantFeed consolidated feed for OPRA data to handle this.
Wider adoption of ITCH for options might help mitigate these increases, while its established presence and clear ownership would discourage any disruptive infringement claims. But would any concerns of non-Nasdaq markets about adopting a competitor’s protocol hinder it from attaining definitive standard status? Certainly not in the case of CNSX, which recognizes that it needs to follow the lead of its clients—a lead that others will also surely have to follow.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: http://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@waterstechnology.com
More on Emerging Technologies
Bank of America reduces, reuses, and recycles tech for markets division
Voice of the CTO: When it comes to the old build, buy, or borrow debate, Ashok Krishnan and his team are increasingly leaning into repurposing tech that is tried and true.
Waters Wavelength Ep. 313: FIS Global’s Jon Hodges
This week, Jon Hodges, head of trading and asset services for Apac at FIS Global, joins the podcast to talk about how firms in Asia-Pacific approach AI and data.
Project Condor: Inside the data exercise expanding Man Group’s universe
Voice of the CTO: The investment management firm is strategically restructuring its data and trading architecture.
BNP Paribas explores GenAI for securities services business
The bank recently released a new web app for its client portal to modernize its tech stack.
Bank of America and AI, exchanges feud with researchers, a potential EU tax on US tech, and more
The Waters Cooler: Broadridge settles repos in real time, Market Structure Partners strikes back at European exchanges, and a scandal unfolds in Boston in this week’s news roundup.
Bloomberg rolls out GenAI-powered Document Insights
The data giant’s newest generative AI tool allows analysts to query documents using a natural-language interface.
Tape bids, algorithmic trading, tariffs fallout and more
The Waters Cooler: Bloomberg integrates events data, SimCorp and TSImagine help out asset managers, and Big xyt makes good on its consolidated tape bid in this week’s news roundup.
DeepSeek success spurs banks to consider do-it-yourself AI
Chinese LLM resets price tag for in-house systems—and could also nudge banks towards open-source models.