MDDL and the Quest for a Market Data Standard

Elsevier UK Jobcode:QMS Chapter:Ch02-H6839 31-7-2007 9:08a.m. Page:5 Trimsize:165

×234MM

Fonts used:Times & Optima Margins:Top:13mm Gutter:25mm Font Size:10/13 Text Width:120mm Depth:41 Lines

What is market

data?

Chapter 2

It’s quite interesting that I have never seen a definitive statement that succinctly

defines what market data is. Put simply, it is information (a collective term for

instrument prices, trading statistics and news) that supports the investment decision-

making process.

Over 300 years ago, market data took the form of price lists. The first of these

issued in London was by Jonathan Castaing, a broker whose office was a Jonathan’s

Coffee House situated just off Cornhill, in Change Alley – a plaque commemorates

its location, just a short walk from the Bank Tube station (see Figure 2.1).

I really like the idea of deals being conducted over a cup of coffee – a far open-

outcry from today’s world of electronic trading. (I couldn’t go without a reference

to traders crying out their bids on the trading floor, one of which I had the privilege

Elsevier UK Jobcode:QMS Chapter:Ch02-H6839 31-7-2007 9:08a.m. Page:6 Trimsize:165

×234MM

Fonts used:Times & Optima Margins:Top:13mm Gutter:25mm Font Size:10/13 Text Width:120mm Depth:41 Lines

6 MDDL and the Quest for a Market Data Standard

Figure 2.1 Jonathan’s Coffee House plaque

of working on – the London International Financial Futures and Options Exchange,

from 1998 to 2000.)

Even when Castaing’s price list first went to press (Figure 2.2), the fundamental

elements of market data were identified. The ‘Course of the Exchange, and other

things’, appearing twice weekly (on Tuesdays and Fridays) from 1698, continued

throughout the following century. Without such publications, would we be in the

position where there are over 300 stock exchanges world-wide in existence today?

To this day, stock exchanges world-wide disseminate electronically daily official

price lists. It’s amazing to think in this modern world of the world-wide web and

instant access to stock prices that market data originates from a sheet of paper

measuring 10 × 4 inches! Jonathan Castaing’s place in history is assured.

The financial markets are a lot more complex today compared to 300 years ago,

when there were only 15 joint-stock companies with a capitalization of over 900 000

pounds sterling each. At that time, there was a one-to-one relationship between an

issuer and the stock itself. Nowadays, market data plays a key role in the identification

of the issuer, and the various financial products the issuer uses to finance its activities.

An example of this can be seen by examining the shares of DaimlerChrysler. Its

ordinary shares are officially listed in 7 countries, traded on 22 exchanges and priced

in 5 currencies!

Unlike Jonathan Castaing’s day, market data is no longer just a joint-stock name

and its end of day closing price; it encompasses:



reference data – a term that refers to information needed to identify correctly a

financial instrument, an issuer, a trading counterparty (used for transaction routing)

or a business entity



the current pricing and trading activity of an instrument



the historical pricing and trading activity of an instrument



corporate actions that result from corporate or regulatory announcements



financial indices, rates (instrument and issuer), ratings and other indictors.

Elsevier UK Jobcode:QMS Chapter:Ch02-H6839 31-7-2007 9:08a.m. Page:7 Trimsize:165

×234MM

Fonts used:Times & Optima Margins:Top:13mm Gutter:25mm Font Size:10/13 Text Width:120mm Depth:41 Lines

What is market data? 7

Figure 2.2 Jonathan Castaing Price List published in 1698 (reproduced by kind

permission of The Guildhall Library, City of London)