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Page last updated
February 15, 2003




Market data-A Refreshing Paradigm Shift


I can't resist the occasional temptation of walking up to an unsuspecting business person and casually asking if he really believes this Internet thing will catch on. Well, we know the Internet is here to stay, even if the bursting of the bubble shattered some people's belief that the Internet had been sent by the gods to solve the world's greatest problem;scarcity. And perhaps the bursting has created a new audacity of imagination that will lead to another, probably somewhat smaller bubble. The basic tenets of the Internet remain, though. It was created as a way of disseminating information. It has become the largest network in the world. The Internet can change paradigms. Some fiscally responsible ideas to follow

I was well entrenched in the world of Market Data when I first realized that the most basic principles of the Internet would change the face of the industry forever. Moreover, many factors including the economic realities of getting market data out to hundreds of thousands of professionals would act as a speedy catalyst for the reaction. This metamorphosis would need to come about through a changing technology backdrop, an increase in attention paid to customer and trading partner relationship management, and a huge proliferation of data sources.

The history of market data begins with Reuters. That much is certain. Like many other good businesses, the industry got started on the heels of some very sound principles of mathematics. One could greatly reduce the effort and expense of installing lines between all content originators and all users by having a middleman. That middleman is what we call a market-data vendor. His job initially was to take in circuits from several content providers like the New York Stock Exchange and Dow Jones News Wires, aggregate the data, and send it out to customers on one, consolidated line.

Since then, three companies have emerged as the market leaders in the business, with a complement of eight or ten more catering to niche markets. Those vendors have tended to fall into specific niche markets. For instance, Bridge handles most of the U.S. equity market while Reuters owns most of the international presence in equities and capital markets, and Bloomberg has embraced fixed income. To add value, some have created elaborate front-end interfaces for presentation of the data. Some have gone through painstaking efforts to collect and purify data.

Through the ages, though, very little has changed about the basic business reason for having a middle-man to collect all the data; cutting, by orders of magnitude, the number of circuits needed to feed the hungry appetites of industry professionals.

It is the very presence of large private networks, though; the existence of a need for circuits, which has caused so much pain in this business for so long. Some of this may be changing. Certainly, it is safe to say that there are new purposes for market data off the trading floor, which are fueling some new thinking about the way market data is delivered to end users.

Things certainly have changed at the banks and brokerage houses. What comes to mind first is that new technologies and business vision have enabled banks to see into the future of their customer and trading partner relationships. To wit, many banks are seeing the need to create portal sites through which their employees, customers, and industry partners can receive real-time market prices and news, view proprietary information like trade data and research, and even execute trades. The web is the perfect vehicle for delivery; in fact, it may be the only vehicle that doesn't carry a cost large enough to preclude production of such portals. In theory, the web allows massive amounts of information to be decentralized, and yet conveniently aggregated on the same screen.

There are some challenges, though.

For instance, the intended end-user is probably sitting behind a complex set of corporate network security involving firewalls and proxy servers, and in most cases, is resistive for one reason or another, to downloading an application. Also, you have the challenge of needing to incorporate data from disparate sources, some of which don't come to you through the wires from your market data vendor. Lastly, it makes good sense to provide seamless access to the information from any browser, anywhere in the world. It makes sense that if you make it incredibly easy for your users to access your portal from any desktop anywhere, they will make more constant use of it, and come to rely on it more heavily. The challenge here is that you need to get data directly into the browser; to be rendered and viewed there, rather than in a conventional application, such as the Java and Active-X programs that fuel the retail demand for web-based data.

What's more, firms have realized how much it costs them to receive vital market information, and are grappling with trying to reduce expenses. Part of what has hastened this process is that, unbelievably, their yearly cost per seat seems to be rising. Given that the industry is growing, and data is more readily available than ever, this is not only counter-intuitive -- it's downright frustrating. The source for most cost increases from market data vendors is the ever-increasing need for additional bandwidth and infrastructure; more circuits. As trade volumes increase, so too does the need for higher-capacity circuits to transmit the data without delay. Customers of late have begun to receive notices from their vendors that they are over-utilizing their circuits and will be charged to upgrade. These costs aren't trivial. They can add hundreds of thousands of dollars or more to the annual budgets of market data managers.

What's more, high-end users of market data can often be forced to subscribe to several services to receive all the data they need. This is because no one vendor seems to have all the data. So, a typical trader's monthly expense for data is doubled or tripled. The physical real estate needed to house all these screens is becoming burdensome as organizations struggle with space constraints.

The industry is no longer satisfied to have the kinds of limitations we have now with respect to market data. Huge private networks designed for the dissemination of real-time data may well be in their golden years. One thing is clear. There is a need for a rock-solid, reliable, web-based standard for the publication and transmission of market data. That standard may very well be emerging in a proprietary technology designed by Caplin Systems and now adopted by major exchanges, data vendors and brokerage houses.

The protocol, named RTTP for Real-Time Text Protocol, allows a bank or brokerage house to publish any form of text-based data (quotes, news, research, trade confirmations, alerts, etc..), from any source, directly onto the web. A properly authenticated user can access that data on a web page, directly in his browser, without ever having to download an application. The RTTP protocol also has a highly sophisticated mechanism that allows the data to travel to the browser, unimpeded by firewalls and proxy servers; all real-time, on time, highly reliable, and continuously updating without refreshing the browser.

To publish data in RTTP you need an RTTP Server, and these come in two flavors. The RES (RTTP Enterprise Server) can maintain 3,600 concurrent users on a single server and represents the version for company wide applications or where relatively low data rates are required, typically of the order of one update per second. The RGS (RTTP Global Server) is designed for much heavier usage and can serve data to 30,000 concurrent users on a single server or 700,000 user updates per second. Both server models are fully scaleable, you simply add more boxes.

On the client side the company has developed RTML (Real Time Mark-up Language) to help web editors to easily display streaming data within their current offering, and RTSL (Real Time Scripting Layer) to allow more advanced programmers to derive data within the browser using functions within Java Script type languages. What's more, Caplin have developed WebSheet, a fully customizable front end within the browser itself, allowing users to open multiple sheets incorporating resizable frames. Data can be displayed in these frames from diverse sources, all coming together within the browser itself.

Because the data source is independent from the front end this offers companies the ability to vend their data easily and effectively onto any third party website. On the other side of the coin, companies wishing to augment their web products with streaming data now only need to point the browser at any suitably authorised RTTP server, instead of having to take in the data and serve it from their own infrastructure.

The system was designed to cater to mission-critical applications such as the ones described above. Data from conventional market data vendors can be easily integrated into the system, as well as any proprietary data the publisher chooses to include in his or her offering. The system can be used to fuel two-way messaging, as would be needed in on-line trade execution applications.

It's no wonder the existing solutions for web publishing from conventional market data vendors have fallen far short of the mark; they have huge private networks fueling the large majority of their revenue streams, and have little motivation to produce web solutions. By it's very nature, and massive implications on the industry, a viable solution will, in all likelihood, come from a smaller, private player who has no vested interest in the status quo. RTTP seems a very likely candidate to become the standard for publication of data on the web. It is the only technology currently available that seriously and completely addresses the needs of banks and brokerage operations, which is why I joined Caplin Systems in February of this year.

Caplin has concentrated a good deal of its resources in servicing large banks and buy-side institutions, most of whom have a need to improve product offerings to their customers and trading partners. If we can be of assistance to you, please don't hesitate to call me directly.

Ariel Jacobs
Executive Vice President, Americas
Caplin Systems Inc.


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