What Is a Real-time Market Data?

By reading our article, you can find detailed information about real-time data that provides greater price enforcement assurance for buyers and sellers of securities

Table of Contents

What Is a Real-Time Market Data?

Key Notes About Market Data

The Ways Of Understanding Real-Time Data

Real-Time Stock Prices And Delayed Stocks

What Are Your Options For Real-Time Stock Quotes?

Other Things You Should Know

Conclusion

In the financial industry, real-time is the time when a system transmits information to users either immediately or shortly after the event occurs. Typically, online brokerages provide a real-time data feed that displays stock prices and related real-time changes with a small delay. So, clients can base their investment ideas on the most up-to-date information. If you need real-time stock quotes, the first and indeed one of the biggest challenges you’ll face is choosing the right stock market. By digging deeper into the article, you may not understand the differences between larger and smaller purchases, and you may find it easy to choose the right purchase for your data needs. In today’s article, we will shed light on all your questions about market data with our transparency.

Key Notes About Market Data

• When it comes to real-time, what comes to mind is information that is transmitted as soon as it occurs or with only a short delay.
• In financial markets, real-time creates a reference to a security’s price. The accuracy of pricing is a very important element for market participants.
• Many financial networks, websites, and apps offer delayed quotes that show you where a stock or currency was about 20 minutes ago.
• Delayed bids are often enough information for the casual investor who doesn’t want to time the market.
• Some brokerages and certain paid services that traders utilize offer real-time, up-to-date offers.

The Ways of Understanding Real-time Data

As all you know, many financial websites offer free stock quotes to the public. However, most of these broadcasts are not real-time broadcasts. There are also delays of up to 20 minutes. Therefore, when viewing stock prices on any financial website, you need to be aware of the time posted next to the stock price to verify if the price is indeed real-time. Having accurate real-time quotes, even the smallest time difference between a provided quote and the real-time situation can turn a profitable position into a loss. This is especially important for traders. We would like to draw your attention here. Especially for intraday fast traders, getting real-time quotes instead of delayed quotes can be critical.

Real-Time Stock Prices and Delayed Stocks

Stock prices show actual trading results on exchanges such as the New York Stock Exchange or NASDAQ. Investors and traders can get quotes on the Dow Jones Industrial Average, other indices, or individual stocks from a range of financial news sources. However, as it is known, some financial news services do not provide real-time information and, on the contrary, cause a 15 or 20-minute delay in stock prices.

The prices of actively traded stocks can fluctuate significantly from minute to minute or second to second. So it is imperative to know the current price. In a rapidly rising or falling market, also known as a fast market, even real-time quotes can be difficult to follow. In this market scenario, a 15- or 20-minute delayed quote is nearly useless, as the price of a stock may have moved significantly in that time frame.

Delayed bids are often enough information for the casual investor who doesn’t want to time the market. For example, if a trader has a long-term portfolio of stocks he doesn’t want to sell, he doesn’t need the second price information. Even lagged stock prices provide a general setting for where stocks and indices are heading and whether they’re heading up or down.

To provide real-time quotes requires 2 key elements, effort, and technology. Therefore, this service has a cost. If companies do not want to bear this cost. Instead, they offer delayed quotes. For example, Reuters provides a lot of financial information, but stock prices show a minimum lag of 15 minutes. Financial news services often offer real-time offers as a premium subscription service.

Why are Stock Prices Different from Stock Markets?

Stock prices are determined by the exchanges where stockholders put their shares on sale and bidders bid. The selling price is determined by the stockholders and is the last selling price offered. In addition, the “offer price” is the latest price offered by stock buyers.

The difference between these numbers is called the spread. Exchanges match buyers and sellers. Every time they do, a sale occurs. The price of this sale is usually between the buy and sell prices and is called the “end sale”. The price of the stock is re-determined after each sale. This final sale represents the stock price on that exchange. The final sale is called the “final price”.

The reason why there is no single stock price is that this process of matching buyers and sellers occurs across multiple exchanges for the same stock. On the Nasdaq exchange, a buyer and seller can be matched by creating a final price. Simultaneously, another buyer and seller are matched for the same stock on the IEX exchange and a second final price is created. Meanwhile, BATS, NYSE, and other exchanges also trade stocks, generating even more final prices.

How Do Stock Prices Converge?

Stock prices tend to converge across exchanges. This is because stock buyers and sellers can place their orders on any exchange. If a stock has a higher price on an exchange, sellers automatically turn to it. This extra supply lowers the price. Similarly, if the price goes too high on an exchange, buyers don’t pay a premium. They switch to another exchange.

This process is less obvious for individual investors. However, larger trading firms have a fiduciary responsibility to get the best deals for their clients. As a result, many exchanges have many stock prices, prices tend to be very similar between exchanges.

The degree of resemblance between exchanges has a lot to do with trading volume. The higher the “liquidity” of stock on an exchange, the less likely the stock will have a large variance from other exchanges. Stated in other words, the longer it takes for a buyer and seller to match, the more slippage can occur between the most recent sale price and the “stock price” on a different exchange.

What are Your Options for Real-time Stock Quotes?

Stock prices are closely watched by both retail and professional traders. If you want to increase engagement on your platform or website by displaying real-time stock prices, you have three options.

Consolidated Tape Provider

A consolidated tape feed pulls stock quotes from all exchanges in the US and aggregates them. Consolidated band stock prices such as Nasdaq, NYSE, IEX, MEMEX, and so on are taken as the gold standard, as there are now more than a dozen stock exchanges operating in the US. The combined tape gives you the National Best Offer and Offer (NBBO), which includes the best bid someone is willing to pay for a stock and the lowest price someone is willing to sell the stock for.

The problem with getting the “gold standard” of anything means it’s too expensive. There are only a few providers that combine all exchanges and these providers charge you high fees for accessing data. Between exchange fees, merchant fees, and per-user fees, you could be looking at six per year or higher, depending on your platform.

Per-user charges mean that every time you show data to a user, you have to track it and pay a fee. If you have a large number of users, this can add up quickly. It’s also a time-consuming process for your team as you have to create an internal system to monitor your users. You may also have to pay your data provider to set up a server and connect you to the data. If you’re trading and running an institution, you’ll need to show your users NBBO from a brokerage SEC consolidated band. Most other companies, such as investment advisory platforms, do not need NBBO and can significantly reduce their costs with one of the other options.

The best of the industry are Nasdaq, CBOE 1, and NYSE. These three exchanges account for about 60% of all transactions. It is also very high quality due to the trading volumes. This could be the shifting of feeds. There are moments when trading occurs at different levels throughout the day. Depending on your platform, this may be good for your users. If they manually examine the stock price, they are unlikely to notice a difference. These larger exchanges have so much volume that they regularly converge around the same price. It has a disadvantage. This means you have high exchange fees of up to thousands of dollars per month. You will also receive some or all of the per-user and connection fees mentioned earlier. However, if you’re on a budget and don’t have to use the combined tape. This is the perfect option for you.

Single Small Exchange

Your last option is to buy stock quotes from a single low-volume exchange such as IEX or MEMEX. These exchanges make up <1% to 3% of the total market cap. If your platform is mainly focused on large-cap stocks like AAPL and TSLA, which are often traded, most of your users probably won’t understand the difference between prices on large and small exchanges. Deviation from NBBO will be more pronounced with small or micro-cap stocks. This would be the advantage of smaller exchanges. Usually, there are no trade-in, per-user, or connection fees. Fees vary by exchange, so working with an experienced partner on each exchange helps.

Of course, you get what you pay for. While you save big on overhead, it turns out that the prices your user's show don’t match what they see on other exchanges. Our advice to you is to start with a small change as you get started and run your user testing. As your budget grows and your users expect higher quality data, you can upgrade to larger exchanges or consolidated tape. Businesses are not very inclined to choose this option because it can be difficult to switch your platform from one provider or exchange to another. There’s a ton of paperwork to submit, and you don’t want to be on the wrong side of regulators or exchanges. This is where working with a partner like Finage can help. We help you set up for your needs at the lowest possible cost and then help you migrate to larger exchanges as you grow.

Other Details You Should Know

Choosing a trade is only half the process. As we mentioned before, you will also need to ask yourself these questions:

• How can I connect to the stock market? Should I physically set up a server near the exchange and pay someone to maintain it, or do I work with a third-party vendor that already has the infrastructure?
• How do I get the data back? There are many different access methods. Most of our customers connect via Web API to request updates as needed, or via WebSocket to continuously publish prices.
• What documents should I send? Each exchange has different paperwork and different departments you need to communicate with. You must also determine whether you must report users, how often you must report them, and how you will pay for each user.

Conclusion

In today’s article, we discussed what is real-time data. In addition, we touched on important tips in the stock markets and the industry. Here you can find detailed information about real-time data that provides greater price enforcement assurance for buyers and sellers of securities. We hope that this blog post will be beneficial for you. We will continue to create useful works to get inspired by everyone. We are sure that we will achieve splendid things altogether. Keep on following Finage for the best and more.