Opening Cross: An Intensifying ITCH—Will You Scratch It, Or Let It Spread?
![max-bowie max-bowie](/sites/default/files/styles/landscape_750_463/public/import/IMG/807/101807/max-bowie-incisivemedia-color.jpg.webp?h=ee12d8fd&itok=FIjEj0Li)
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.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
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. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
More on Emerging Technologies
This Week: IPC extends Google Cloud partnership, BlackRock/AIA, DTCC and more
A summary of the latest financial technology news.
Waters Wavelength Podcast: Deutsche Bank’s Boon-Hiong Chan
Boon-Hiong Chan from Deutsche Bank joins the podcast to talk about blockchain interoperability.
SocGen pushes data, analytics use cases for SG Markets
The bank is letting a handful of clients experiment with its proprietary data and models to inform their research.
Ace high or busted flush? Digital Asset’s mixed fortunes mirror DLT adversity
The vendor hoped to remodel post-trade using blockchain technology—and it still might—but its bumpy progress raises questions over the future of DLT in finance.
AI could cut time for money laundering checks by 99%
Leading crypto exchange rolling out large language model for enhanced due diligence checks.
Standard Chartered keeps faith with quantum experimentation
The bank is aiming to future-proof itself with the ability to adopt new technology at an early stage.
Waters Wrap: CME, Google and the pursuit of ultra-low-latency trading
CME Group and Google have announced Aurora, Illinois, as the location for the exchange’s new co-location facility. Anthony explains why this is more than just the next phase of the two companies’ originally announced project.
This Week: Genesis/Interop.io; S&P Global; Finos/OS-Climate and more
A summary of the latest financial technology news.