Proprietary Data Feeds vs Consolidated Feeds
Proprietary data feeds and consolidated feeds represent two fundamental approaches to market data distribution in financial markets. Proprietary feeds are direct data streams from individual exchanges, while consolidated feeds aggregate data from multiple venues into a standardized format. Understanding their differences is crucial for trading system design and market data strategy.
Core characteristics
Proprietary feeds
Proprietary data feeds provide direct access to an exchange's market data with minimal processing or aggregation. These feeds typically offer:
- Lower latency delivery
- Deeper order book visibility
- More granular price levels
- Additional custom fields and order types
- Microsecond-level timestamps
- Raw order-by-order data
Consolidated feeds
Consolidated feeds, such as the Securities Information Processor (SIP), combine data from multiple trading venues:
- Standardized data format
- Aggregated best bid and offer (NBBO)
- Normalized trade reporting
- Broader market coverage
- Regulatory compliance support
- Millisecond-level timestamps
Latency considerations
The latency differential between proprietary and consolidated feeds can be significant:
- Proprietary feeds typically have wire-to-wire latencies of 50-100 microseconds
- Consolidated feeds may introduce additional latency of 250-500 microseconds
- Geographic aggregation points can add variable latency
- Processing overhead for normalization impacts consolidated feed speed
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Market impact
Trading strategies
Different feeds serve distinct trading approaches:
- High-frequency trading typically requires proprietary feeds
- Long-term investors may find consolidated feeds sufficient
- Market making often uses both feed types
- Regulatory compliance often requires consolidated feed data
Cost implications
Feed selection impacts trading infrastructure costs:
-
Proprietary feeds require:
- Multiple exchange connections
- Higher bandwidth capacity
- Specialized processing hardware
- Co-location services
-
Consolidated feeds offer:
- Single connection point
- Standardized infrastructure
- Lower bandwidth requirements
- Simplified integration
Regulatory considerations
Best execution
Market participants must consider regulatory requirements:
- Rule 611 (Order Protection Rule) compliance
- Best execution obligations
- Trade-through prevention
- Audit trail requirements
Market fairness
The speed differential between feed types raises market structure concerns:
- Latency arbitrage opportunities
- Market fragmentation effects
- Price discovery impacts
- Access equality considerations
Implementation considerations
Infrastructure requirements
Data processing
Feed selection impacts system architecture:
- Market data feed handlers configuration
- Binary protocol processing
- Message normalization requirements
- Timestamp synchronization needs
Future developments
The market data landscape continues to evolve:
- Enhanced SIP proposals
- Distributed SIP architecture
- Competing consolidators
- Geographic latency equalization
- Cloud-native delivery options
Understanding the tradeoffs between proprietary and consolidated feeds is essential for market participants to build effective market data strategies that align with their trading objectives, technical capabilities, and regulatory obligations.