WBR Insights recently published a survey of buy-side firms, and these takeaways caught my eye:

• 74% of respondents say they use Level 3 order book data in their research program
• Of the respondents not using Level 3 order book data — nearly 75% said the main reason was due to their current vendors not providing that level of data
  

So why are so many buy-side firms looking for such granular price data?

In a Word: Competition

Buy-side firms have always looked for an advantage in the marketplace, and data sets that are less readily available can be happy hunting grounds.

Some definitions may be helpful before we dive deeper:

Level 1 Top of Book Data: Shows you the best bid (the maximum price a buyer is willing to pay) and offer (the minimum price at which a seller is willing to sell) in an order book, along with the last traded price. If you just want to know the best available price in the order book or calculate simple metrics like VWAP, Level 1 data should suffice.

Level 2 Depth of Book Data: Goes further by showing you the aggregated order volume by price. The number of price levels is typically limited to five (5) or so levels. Level 2 data is good for understanding the overall order book behavior. For example, you can find imbalances of buyers and sellers.

Level 3 Depth of Book Data: Allows you to see the complete order book with all price levels. Most important, Level 3 does not aggregate orders in any way. You can see each individual order and its place in queue. Level 3 depth of book data enables you to understand the behavior of an individual order, including your own orders. For example, you can determine the probability of an order filling, its resting time in the order book, and other order queue dynamics.


Who Exactly Uses Level 3 Depth of Book Data and Why?

It’s not just systematic quant funds or HFT firms that are using this data. Fundamentals-driven firms with much longer time horizons see the value in such granular price data.

I know this first-hand because DIH (in conjunction with our partner, BMLL Technologies) offers Level 3 depth of book data for global equities, ETFs and futures.

Firms tell us it is critical that they can measure the performance of an order’s execution pre-trade, during the execution, and immediately post-trade.

They also need to be able to generate statistics to assess both market quality and important risk metrics that impact trading performance. For example, they want to know the impact of their order on the price. Or how many levels down the order book will they need to go to fill an order of a given dollar volume (often referred to as “sweep to fill”)?

Sometimes the use cases are alpha discovery, but even more so the focus is on risk management.


Level 3 Data Is Finally Accessible and Affordable

There’s another reason more firms are using Level 3 depth of book data. Now they can.

Advancements in cloud computing (it’s secure, faster, and cheaper) have made it possible for firms to benefit from fine granular price data without taking on the huge burden of building and maintaining the infrastructure to store and analyze these huge data sets. They can simply log in from a Web browser to access and analyze the data.


What about you? Are you using or thinking about using Level 3 depth of book data? I’d love to hear your thoughts.

If you’d like a copy of the WBR Insights’ survey, please email me and I’ll send it along to you.

Also, please connect with DIH on LinkedIn and Twitter.

Stay Healthy. Stay Safe.

Regards,
Tom Myers

The CME has been accused of misusing its power, after the exchange announced plans to start charging fees for data that had been free — including data that is in the public domain and for which they don’t own the copyright.

In addition, the CME wants to require redistributors to turn over details about their customers.

What effect will this have?

Higher market data costs for everyone, for a start.

This dramatic change from how other major exchanges around the world handle such data is being challenged, however.

Exchange Data International (EDI), is crying foul. EDI has written to the Commodity Futures Trading Commission (CFTC), the heads of the relevant Committees of the US House of Representatives, and the US Senate – which oversee the CFTC – requesting they investigate the CME’s plans to charge for what has always been a no-fee service. Legal advice taken by EDI views the CME’s new fee policies as illegal, anti-competitive, and extremely disruptive.

You can read more details here, then tell me what you think.

I’d love to hear from you — please connect with DIH on LinkedIn and Twitter.

Stay Healthy. Stay Safe.

Regards,
Tom Myers

London, Austin, TX (Nov. 12, 2020) — BMLL, the award-winning data and analytics provider, today announced a collaboration with Data In Harmony (DIH), a data provider and data consultancy covering global financial markets, to make BMLL’s Data Lab and Data Feed available to US-based market participants, helping them unlock the predictive power of order book data.

The collaboration comes following the announcement in October 2020 that BMLL is now providing five years of granular, Level 3 order book data for US markets. This data gives systematic hedge funds, quants and algo traders the ability to gain insights, backtest their trading strategies over a sufficiently long time horizon to capture a wide spectrum of market scenarios and improve alpha generation.

The BMLL Data Lab takes BMLL’s granular Level 3 order book data and combines it with easy-to-use APIs and analytics libraries in a secure cloud environment, allowing quants to perform scalable research without the burden of data curation or engineering. The LAB seamlessly integrates with production tools and workflows, allowing users to efficiently turn research into actionable results.

The BMLL Data Feed provides users with the full power of the BMLL Data Lake and Data Lab’s  analytics capabilities, delivered in the form of derived data feeds. BMLL’s Data Feeds are pre-computed from the most granular, full-depth order book data, giving participants actionable insight on the markets they trade. These analytics are used by leading buy-side and sell-side institutions as well as major exchange groups and trading venues to better understand and analyze trading behavior on their venues.

The distribution agreement with DIH brings BMLL’s data and analytics capabilities to US capital markets participants through DIH’s extensive network of buy-side players and service providers.

“We are excited to add BMLL’s Level 3 depth of book data solutions to our offering,” says Tom Myers, founder of DIH Solutions. “Prior to founding DIH, I spent a good part of my career providing high-frequency tick-by-tick data to the buy- and sell-side. However, depth of book data just wasn’t feasible to make commercially available given its storage challenges and the lack of tools available to analyze it. BMLL has built what I and so many market participants have wanted — access to Level 3 data and analysis tools without all the headaches (and costs) of maintaining such a large data set.”

DIH helps firms, including investment banks and hedge funds, to find and on-board the reliable financial and alternative data they need, helping them improve data quality and reduce data costs. In an environment of growing emphasis on data quality, and a push by management to hold down costs, DIH was founded to offer an alternative to legacy data vendors whose data is often incomplete and inaccurate, expensive and licensed under restrictive terms and conditions.

Paul Humphrey, CEO of BMLL Technologies, said: “We are delighted to collaborate with Data In Harmony and make our data and analytics available to clients and market participants via their US-based ecosystem. It is now more important than ever to harness the power of the full-depth order book and scalable cloud compute to provide relevant insights and deep analytics to our clients, helping them to truly understand how markets behave.”

Read more about game-changing, nano-second Level 3 order book data, available now!

About BMLL Technologies
BMLL Technologies is a financial data engineering and data analytics company serving the world’s most sophisticated market participants. BMLL specialises in providing clients access to granular order book data and advanced analytical power at unparalleled speed and scale. Born out of the machine learning labs in the Engineering Department at Cambridge University, the platform allows financial services firms to apply complex statistical techniques to niche big-data sets and perform machine learning on Level 3 order book data with applications such as market impact, pre & post trade analytics, order book simulation and compliance. The offering means clients no longer need to buy and curate the data from global exchanges, instead are offered cost effective access to the full order book with a long history for back-testing. For more information, please visit our website, www.bmlltech.com or visit our Twitter @bmlltech.

About Data In Harmony
Data In Harmony (DIH) is both a data consultant and a data provider. DIH’s data experts help companies find and on-board the data they need, as well as monetize their data to create new revenue streams. DIH also provides a wide variety of financial data, including trend capture analytics, reference data, corporate actions and more. DIH also offers alternative data, including real estate, class action lawsuits, bankruptcies and private company data. DIH licenses the same data engineering tools it uses to pull in raw data, process it and deliver finished data files to end-users in various formats.

DIH’s clients include startups, established firms and household name institutions located around the world. They choose to hire DIH to help improve data quality, reduce data costs and provide them with new quality data sets.

Source: Markets Media