xignite demystifying us equity quotes
TRANSCRIPT
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THANK YOU FOR JOINING OUR WEBINAR
DEMYSTIFYING US EQUITY QUOTES & PRICES PART 1 OF 2: VENUES, QUOTES & PRICES
Presented by Stephane Dubois August 2012 August
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AGENDA
Part 1: Venues, Quotes & Prices • Background • US Equity Venues • Types of Quotes & Prices • Data & Money Flows
Part 2: Costs, Delivery & Integration • Fees, Agreements, Reporting & Usage • Delivery and Integration • Which Solution Is Best For Me? • Demonstration
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Types of Quotes & Prices Data & Money Flows
Part 2: Costs, Delivery & Integration Fees, Agreements, Reporting & Usage Delivery and Integration Which Solution Is Best For Me?
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BACKGROUND
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AUDIENCE
Job Type • Developer • Product/Project Manager • Business Owner/Decision Maker
Level of Expertise • Novice/Intermediate • Not a low-latency person
Purpose • Learning about industry • Building/rebuilding application(s) • Mobile/Web/Mid-Office, Front-Office • Want to find easiest/cheapest way to get US equity data meeting
your needs
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HOW HARD CAN THIS BE?
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ASSET CLASSES
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TYPES OF EXCHANGES
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THE REGULATORY VIEW
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US EQUITIES VENUES
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1949 Baltimore
1954 Washington
1969 Pittsburgh
1954Washington
NASD 1938
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HISTORY OF US STOCK EXCHANGES
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1800’s 1900’s 2000’s
Philadelphia 1875 Stock Exchange
1971
1908 1929 1953
New York Stock Exchange (NYSE)
1817
2007
Boston Stock Exchange (BSE) 1834
NASDAQ BX
1790 Board of Brokers
2008
2008
NYSE AlterNext
1998
NASDAQ NASDAQ & AMEX
Market Group
2002
FINRA
2002
1998 Island ECN INET
1967 Instinet 2003
2005
NYSE Regulation 2007
OMX
2007
Archipelago Securities Exchange 2005
Pacific Exchange
1997
2006
1882
Los Angeles Oil Exchange
1957
San Francisco Stock and Bond Exchange
EuroNext
2007
NYSE Arca
NASDAQ PHLX
NYSE Mkt
101010
2005
BATS Trading 1998
Attain ECN
2005
101010
DirectEdge DirectEdge DirectEdge Knight
2007
ISE Stock Exchange
2006
CHI-X Europe
2011
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Chicago Stock Exchange (CHX)
1882
St Louis – Cleveland - Minneapolis 1949
New Orleans 1959
Chicago Stock Exchange (CHX)
1993
1885
Cincinnati Stock Exchange National Stock Exchange
2003
20112007
CBOE Stock Exchange
20112011
2011
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TRADING VS. LISTING About Listing
• The primary listing exchange is the main exchange were a security is bought/sold.
• Not all market centers list (only NYSE, NASDAQ, CHX and BATS are).
• An exchange can be approved for listing yet have none or few listings.
About Trading • Exchanges must by law provide best
execution, which means routing orders to other market centers.
• Orders can be routed to a given market center directly.
• All market centers execute orders for securities they do not list.
• Some are not even the first market center for securities they list.
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Institutions Individuals
Institutional Broker/Dealers
Retail Broker/Dealers
Market Makers
Order Matching
Order Routing
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LISTINGS BY ASSET CLASS
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2,515
242
1,831
506
427 318 21 19
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5 3
3
1,176
2 358 129
48 17 16
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Common Funds StructuredProducts
Preferred ADS Warrant Unit NYRS Rights
NASDAQ NYSE NYSE ARCA NYSE MKT CHX BATS
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MARKET SHARE
Source: BATS (June 16-July 15 2012)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Shares Value Trades
NASDAQ NYSE BATS DirectEdge CBSX CHX NSX
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MARKET SHARE
NYSE Listed
NASDAQ Listed
Regionals Listed Total
NASDAQ 16.5% 30.1% 21.7% 21.1% NYSE 31.8% 12.3% 20.5% 24.7% BATS 11.0% 13.1% 14.9% 12.2% DE 8.8% 10.1% 9.7% 9.3% CBSX 0.5% 0.4% 0.6% 0.5% CHX 0.2% 0.3% 1.0% 0.4% NSX 0.3% 0.4% 0.3% 0.3% NYSE MKT 0.0% 0.1% 1.0% 0.2% Others 30.8% 33.2% 30.3% 31.4%
Total 100.0% 100.0% 100.0% 100.0%
14 Source: BATS (June 24-July 23 2012)
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EXAMPLE: FB’S FIRST 10 SECONDS
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OTC MARKETS
• Since 1913 (“Pink Sheets”) • Interdealer Quotations • Private Company
Companies • 9000+ Companies • No Filing Requirements • Small Closely Held • Thinly Traded
Multiple Levels • OTCQX, OTCQB, OTC Pink, etc.
•A system, not an exchange •Interdealer Quotations •Different From NASDAQ •Operated by FINRA
Companies •8000+ Companies •Filing Requirements •Delisted Companies •Dually Quoted
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• Since 1913 (“Pink Sheets”) •A system, not an exchange
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AND HOW ABOUT….
MUTUAL FUNDS? • Different from Exchange Traded Funds. • Not traded on stock exchanges. • No quotes and prices, only NAVs (Net Asset Values). • Reported through NASDAQ’s Mutual Fund Quotation System.
INDICES? • Not securities. • Not traded. • No quote and prices, only values. • Calculated by the index company or exchange. • Subject to completely separate licensing and rules.
Subjects of future webinars…!
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TAKE-AWAYS
US equity markets are complex and fragmented: • Stocks are traded in 15 exchanges and dozens of market centers. • Stock exchanges trade more than just stocks. • Some stocks are traded on many exchanges. • Some stocks are traded over-the-counter. • Much activity occurs in dark pools. • No exchange can provides a full quote picture. • Even the primary listing exchange for a stock tends to only
perform a fraction of the trades for that stock. All of this impacts quotes and prices…
• What is the quote or price for this stock is not an easy question.
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TYPES OF QUOTES & PRICES
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THE 3 CONSIDERATIONS
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DELAY
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DEPTH
LAST SALE BEST BID OFFER (LEVEL 1)
DEPTH OF BOOK LEVEL 2
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DEPTH TERMINOLOGY
Clarifications • Last Sale and Last Price have the same meaning (Last Trade Price) • Close Price is the Last Sale price at market close • Offer and Ask are often used as synonyms • A Quote is really a bid or an offer although the term is often used
to indicate a BBO • NBBO is the best nationally consolidated quote (CTA)
Depth of Book and Level 2 Info are often confused • Their meaning can vary • Level 2 is sometimes used to indicate Depth of Book • Level 3 is sometimes used to indicate Level 2
Volume is derived from the Trade Quantity • Calculations are done by quote vendors • Other fields are also derived (change, etc.)
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BREADTH OF COVERAGE
INDIVIDUAL EXCHANGE
vs. CONSOLIDATED
TAPE
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CTA
Consolidated Tape Association • Oversees the dissemination of real-time trade and quote
information (SEC Regulated) • All equity exchanges are members
Consolidates trades and quotes data • Consolidated Tape Plan (CTP) • Consolidated Quote Plan (CQP) • Operating authority for CTS and CQS • Operates its own infrastructure (SIAC) • CQS calculates the NBBO (National Best Bid and Best Offer)
Consolidates end user fees from exchanges • All CTA feeds are fee liable • Redistributes fees among exchanges based on quotes issued
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EXCHANGE SPECIFIC DATA
Only data from that exchange • Only includes securities traded on that exchange • Can combine multiple exchanges (e.g. NYSE + Arca + MKT) • Coverage of stock universe varies by exchange • Includes securities listed in other exchanges • Liquidity and coverage varies by security • Only include Bid, Ask, and Last Sale from that exchange • Volume is limited to that exchange too
Not subject to the same fees as CTA fees • Exchange have more pricing flexibility
– No user fees for certain depth options (last sale, BBO) – Usage based pricing
• All pricing policies must be approved by SEC
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DEPTH BY EXCHANGE Exchange CTA Level 2 Depth of Book BBO Last Sale
NYSE CTA Network A CTA Network B
NYSE OpenBook NYSE OpenBook MKT OpenBook MKT OpenBook ArcaBook Web
NYSE BBO MKT BBO Arca BBO
Composite RRP NYSE RRP NYSE Trades ARCA RRP ARCA Trades MKT RRP MKT Trades
NASDAQ UTP Level 1 FINRA Level 1
NASDAQ Level 2 NASDAQ TotalView PSX TotalView BX TotalView
NASDAQ Basic PSX Basic BX Basic
NASDAQ Last Sale PSX Last Sale BX Last Sale
BATS DROP (authorized only)
Multicast Pitch TCP Pitch
TOP
DE EdgeBook Attributed
EdgeBook Depth
CHX CHX Book Feed
CBSX CSM
NSX NSX Depth of Book (members only)
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IMPACT ON COSTS DELAY
• Real-Time data is generally fee-liable and requires exchange agreements (BATS is the exception).
• Delayed data is non-fee liable but requires exchange agreements and admin fees for NASDAQ (not for NYSE).
• Historical data is non-fee liable. DEPTH
• Last Sale data is generally cheaper than BBO, Depth of Book, or Level 2 data for a given exchange (BATS is again the exception).
BREADTH • CTA data is fee liable. • Exchange-specific data is priced specifically by
each exchange using different pricing models. • Some exchanges make all data non-fee liable.
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DATA & MONEY FLOWS
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THE 3 COST FACTORS
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THE FLOW OF DATA
EXCHANGE
EXCHANGE
EXCHANGE
EXCHANGE
VENDOR SUB VENDOR DISTRIBUTOR
USER
USER
USER
USER
USER
USER
VENDOR
VENDOR
EXCHANGE
Owns Collects
Consolidates Consolidates Distributes
Packages/Presents Distributes Consumes
Feed Feed Feed/API App
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THE FLOW OF MONEY
Two Types of Money Flows • Data Licensing Fees • Data Delivery/Access Fees Italics are Optional
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EXCHANGE
EXCHANGE
EXCHANGE
EXCHANGE
VENDOR SUB VENDOR DISTRIBUTOR
USER
USER
USER
USER
USER
USER
VENDOR
VENDOR
EXCHANGE
EXCHANGE
EXCHANGE
EXCHANGE
EXCHANGE
EXCHANGE VENDOR
DISTRIBUTOR
USERLicense Right To Distribute
Pays For Access
Pays For Access
Pays For Access
License Right To Distribute
License Right To Distribute
License Right To Use
Pays For Access
EXCHANGE License Right License Right To Distribute To Distribute
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CONSIDERATIONS
Vendors and Sub-vendors are optional • You can go direct to the exchange • Exchanges can be distributors
Access fees & license fees can take different forms • Monthly fee per firm for Distributor or Administrative Fees • Monthly fee per feed for Network Access Fees
More flexibility around user fees • Monthly fee per user (CTA) • Usage fees (per quote) • Special treatment for certain devices (wall-board, TV, etc)
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PART II
Fees, Agreements, Reporting & Usage Delivery and Integration Which Solution Is Best For Me? Demonstration Q&A
Part II will be released within 2 weeks If you saw this webinar, we will send you a link to
the next one.
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RESOURCES
NASDAQ • www.nasdaqtrader.com/Trader.aspx?id=DPSpecs • www.nasdaqdod.com
NYSE • www.nyxdata.com/Data-Products/Real-Time-Data
BATS • www.batstrading.com/market_data
DIRECT EDGE • www.directedge.com/data.aspx
SEC • www.sec.gov/divisions/marketreg/mrexchanges.shtml
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THANK YOU For more information: [email protected] Presenter: [email protected] Twitter: @sdubois LinkedIn: http://www.linkedin.com/in/sldubois