Automated equity traders in Europe are building a data standard. Here's why. Marc Berthoud, executive director, SIX, says: “Imagine you've got all the major data vendors having to capture all those feeds, understand the logic of the feeds and try to normalise the output in order to have a coherent output for the end user […] The point is, for those 90 feeds there is no chance for the data vendors to have a fully converging educated guess of the data normalisation process.”
The pattern for growing markets goes like this. Players turn up somewhere and begin to trade. They build systems. They spit data out their systems. They scrape up each other's data and try to match it up. Pretty soon, most resources are devoted to laboring in the dirt. Then, somebody looks up and says: You know what? This is crazy! Let's just have all the data in a shareable form from the get go.
It would be neat if communities didn't have to wait for this point – if they could start with standards. Most times there are pre-existing standards that could cater for at least 80% of any new sector's business needs. However, the need for standards will always have to wait for the proof of the market. No one wants to invest in standards ahead of the formation of a viable community.
The big question is: What size does a community have to reach before standards are necessary? Experience suggests communities have to get too big before people recognize the need for standards. If you're battling to keep 90 different versions of the same story in line, as our friends in the European automated equities business are doing, then that's going to hurt loud enough to yell.
As the word about standards grows, I expect to see this level drop. Ninety is too high. You can be saving real money at numbers like five and six. This is simple network math: Once you have a handful of partners, it becomes cheaper to standardize than to maintain variance.