Chapter 8 - Effective Data Management

Abstract

The ability to collect and disseminate massive amounts of market data has allowed traders to execute transactions through an algorithm based on established sets of trading parameters. The speed at which market data can be processed can mean the difference between a successful and an unsuccessful trade. The ability to process massive amounts of real-time and historical data for quantitative analysis has a clear advantage for the development of algorithmic trading. As data flow into both the buy side and the sell side has increased exponentially, a fully integrated database solution must be established to facilitate real-time analysis. The increase in the number of transactions and the speed at which data can be now processed has had a major impact on the financial industry. New technologies such as algorithmic and black box trading have not only increased the number of trades and reduced the number of shares per trade but also changed the dynamics of market data such as the ability to record and replicate trading patterns for canceled orders. This increase is forcing broker–dealers and investment firms to invest significantly in updating their trading and processing infrastructure. A more sophisticated trading infrastructure will see substantial investments in risk management and product integration. The increase in the volume and number of transactions is because of increases= in liquidity and new trading techniques such as algorithmic trading, which gives traders the ability to execute larger and larger orders without moving the market.