Market Data Gets Interesting: Coalition Greenwich

The market structure of market data is set to evolve quickly this year, with the U.S. Investors Exchange (IEX) and Pyth Network as prime examples, according to a recent report from Coalition Greenwich.  

In November 2021, IEX made a regulatory filing with the U.S. Securities and Exchange Commission to charge for their market data in 2022. 

According to Coalition Greenwich, as with most newer exchanges and especially those that started life as alternative trading systems ATSs, IEX historically did not charge for their market data.

“IEX has also been a harsh critic of the pricing and methodology of the incumbent exchanges,” the report said. 

One interesting differential, according to the report, is that IEX considers anything beyond 15 milliseconds “delayed” and, therefore, not fee liable, as opposed to the standard 15 minutes of the SIP and other exchanges. 

The report also argued that unique decentralized finance (DeFi) challengers to the primacy of the traditional market-data providers are also poised to gain traction, the most significant of which is the Pyth Network. 

Pyth collects and publishes continuous real-time market data across assets “on chain” in a sub-second timescale. 

Contributors to Pyth include crypto firms, high-frequency trading firms, as well as MEMX and IEX. 

“Although not necessarily a new world order, taken alongside a contentious debate regarding the governance of U.S. equity consolidated feeds (the SIP), this development can’t be ignored,” Coalition Greenwich said.

Overall, the report “Top Market Structure Trends to Watch in 2022” outlined ten diverse market structure and technology trends that will be on our radar as they reshape the industry in 2022. 

On the regulation side, the report said that more market transparency is coming. 

Regulators in the U.S. and Europe are pushing for the next round of increased market transparency through new regulatory proposals and the threat of additional regulations, which is encouraging the industry to act first.

“U.S. regulators are increasingly focused on enhancing trade reporting rules for U.S. bond markets. Exactly what these new rules look like remains unclear, but more transparent markets are a given.”

The agenda of SEC Chair Gary Gensler’s administration is so long and so impactful that everyone in nearly every market should keep a close eye on what is proposed, according to Coalition Greenwich.

“We foresee an endless string of (hopefully in-person) meetings and roundtables to gather industry feedback to proposed rules that could, in some cases, upend long-held industry practices,” they said.

On the technology front, the report said that process automation is high on nearly everyone’s priority list for 2022. 

In addition, over the past five years a big wave of consolidation hit institutional fintech. 

“State Street bought Charles River. FactSet bought Portware. Ion bought Fidessa. And more recently, Broadridge bought Itiviti.” 

While these and many other combinations created new powerhouses with scale and uniquely diversified product offerings, they also drove the creation of hundreds of startups that saw an opportunity to build new technology on what they hoped would prove to be a more nimble platform, the report said.

“This trend is particularly evident among order/execution/portfolio management systems, AI-driven analytics and, more recently, market infrastructure (i.e., settlement).”

Coalition Greenwich also expects job upgrades, both for individuals and firms, to continue.

Nearly every firm has reexamined at least parts of their business for this new world we live in, and are now looking for talent to execute on that strategy. 

“Crypto-focused firms and new fintechs get a lot of the attention for attracting industry professionals out of TradFi jobs, but banks and asset managers continue to attract top talent as they reshape their businesses for this increasingly digital world. This is one disruption that will be good for everyone, once the chips all land on the table,” the report said.