Module 2 - Data

What is contributed data in financial markets?

Contributed data is information, pricing data, or quotations that are voluntarily provided and submitted by market participants, traders, or organizations to make information visible either internally within an organization or externally to data vendors and market participants.

What distinguishes contributed data from other types of market data?

Contributed data is actively submitted by participants rather than being automatically captured from electronic trading systems. It relies on voluntary provision of information by contributors who choose to share their pricing or other data.

Who are the typical contributors of data in financial markets?

Contributors are typically large financial organizations, traders, trading teams, market makers, and financial institutions that have pricing information or market data they are willing to share with other market participants.

Why do organizations contribute data to external parties?

Organizations contribute data to establish market presence, provide liquidity information, share pricing quotations, enhance market transparency, and make their data available to other market participants through data vendors or external platforms.

What is the difference between internal and external data contribution?

Internal contribution is when one part of a large organization publishes data within that organization to other departments, divisions, or individuals. External contribution is when data, pricing information, or quotations are sent outside the organization to external parties such as data vendors or websites.

Which type of contribution keeps data within organizational boundaries?

Internal contribution keeps data within organizational boundaries, making information visible only to different departments, divisions, or other individuals within the same organization.

What is exchange data?

Exchange data comprises market information generated and distributed by exchanges and similar entities (MTF, ATS, IDB) including quotes, trades, and other real-time market information from their trading venues.

Name three types of entities that generate and distribute market data similar to exchanges.

MTF (Multilateral Trading Facility), ATS (Alternative Trading System), and IDB (Inter-Dealer Broker)

Why do exchanges and similar entities distribute data?

Exchanges distribute data to provide market transparency, support client decision-making, enable market participants to access pricing information, and generate commercial revenue from data services.

What are the two main commercial models for data distribution considered by exchanges?

Direct distribution (selling data feeds directly to clients) and indirect distribution (selling through consolidating data vendors who aggregate data from multiple sources)

List three types of data that exchanges generate and distribute.

Real-time quotes, trade execution data, and market depth information

What is an example scenario where multiple quotes for the same stock exist across different venues?

A stock may have quotes on both a primary exchange and an OTF (Organised Trading Facility), resulting in different price levels available simultaneously across these venues.

What is the key difference between voice broking and electronic broking in IDB operations?

Voice broking involves a broker receiving orders via telephone and verbally communicating with multiple counterparties to find the best price, while electronic broking is conducted through electronic platforms similar to exchange trading systems where price discovery occurs digitally.

Describe the operational process of voice broking in Inter Dealer Brokers.

In voice broking, a bank contacts its IDB broker with buy or sell instructions for a specific instrument and price. The broker then verbally communicates this order to multiple counterparty banks simultaneously, facilitating price discovery and trade execution through direct verbal communication.

What are the main asset classes covered by IDBs?

IDBs primarily cover fixed income instruments, money market instruments, and foreign exchange products, serving the wholesale interbank market to facilitate best price discovery and liquidity between financial institutions.

What is the primary function of an Inter Dealer Broker in the financial markets?

IDBs act as intermediaries between banks (bank-to-bank relationships) to facilitate price discovery and trade execution without requiring direct bilateral communication, thereby improving market efficiency and access to liquidity across multiple counterparties.

What are the three main types of data that vendors generate themselves?

1) Contributed data gathered from external sources, 2) Data created by analysts, reporters, and internal teams building datasets from scratch, 3) Derived data created through clever manipulation of data from multiple sources to create new data items

Name two sources from which consolidated data vendors typically aggregate data.

Exchanges and interdealer brokers (also other various electronic markets)

What does the term 'aggregator' or 'aggregating vendor' mean in the context of data consolidation?

A company that brings together multiple feeds of information from various sources (such as exchanges, brokers, and electronic markets) and delivers them as a single consolidated pipe of data to users

How do consolidated data vendors add value beyond simply aggregating data from other sources?

They generate their own data through contributed data collection, employ analysts and reporters to build original datasets, and create derived data by manipulating and combining data from multiple sources to produce new data items

What is the primary function of a multi-data vendor in relation to exchanges and electronic markets?

To consolidate and aggregate multiple feeds of information from various exchanges, interdealer brokers, and electronic markets into a single consolidated data delivery pipe

What type of vendor-generated data involves manipulation of information from multiple sources to create something new?

Derived data

What does ESG stand for?

Environmental, Social, and Governance - three separate criteria used to track company and institutional performance

What is the primary purpose of ESG ratings for investors?

To enable investors to channel their investments according to their philosophy and values, based on how companies perform against ESG criteria

How do third-party ESG rating companies evaluate investment performance?

They provide ratings using metrics similar to credit rating agencies (such as AAA), applying their own conventions to define performance as good, bad, or average

What types of investments can receive ESG ratings from third-party institutions?

Both individual companies and investment funds can be evaluated and assigned ESG ratings by third-party rating companies

What does the term 'market data' typically refer to in financial markets?

Market data predominantly refers to price data and related information about financial instruments, consisting of records (data for a specific instrument) and fields (individual data points within those records), such as bid, ask, last price, volume, and other trading metrics.

Name three main constituent elements of price data.

Bid (price at which you can sell), Ask/Offer (price at which you can buy), and Last Price (the most recent trade price).

What does the 'bid' field represent in market data?

The bid is the price at which a buyer is willing to purchase a financial instrument; it represents what you can sell at in a quote-driven market.

What does the 'ask' or 'offer' field represent in market data?

The ask (or offer) is the price at which a seller is willing to sell a financial instrument; it represents what you can buy at in a quote-driven market.

What does the 'last' field represent in market data?

The last field represents the most recent price at which a financial instrument traded; it is a post-trade price reflecting the most recent completed transaction.

What do the 'high' and 'low' fields indicate in price data?

High represents the highest price at which an instrument traded during a specific period; low represents the lowest price during that same period.

What are economic fundamentals and provide two examples?

Economic fundamentals are data about a country's economy provided regularly by governments. Examples include GDP (gross domestic product), GNP (gross national product), and unemployment rates.

What is the primary purpose of tracking economic fundamental data when making investment decisions?

Economic fundamental data provides insight into the performance of a country's economy, which influences decisions about buying particular financial instruments and understanding the state of the global and individual economies.

Define company fundamentals in the context of fundamental data.

Company fundamentals are data and information about an individual company's financial performance and operational metrics, as opposed to broader economic or country-level data.

What formats can fundamental and economic data be provided in?

Fundamental and economic data is provided in different formats and with varying levels of granularity depending on the provider and country, which can range from daily to quarterly releases.

What is the key difference between fundamental analysis and technical analysis?

Fundamental analysis examines economic data, company financials, and macroeconomic indicators to assess intrinsic value, while technical analysis uses historical price and volume data to predict future price movements.

Name two categories of fundamental data vendors or sources.

Government agencies (which provide economic data like GDP and unemployment), and commercial data vendors (which aggregate and distribute fundamental and economic data in standardized formats).

What is time series data?

Time series data is a set of historical data that shows how a particular instrument (such as price or other data points) has changed over a period of time.

What is a full tick history and why is it valuable?

A full tick history is a complete database of every single change in data, price, order (buy or sell), and record for a designated period. It is the largest and most valuable type of historical data because it provides complete visibility into all price movements and order activity.

What are examples of tracking intervals for time series data?

Examples of tracking intervals include: intraday (every hour or minute), daily (EOD - end of day close), weekly, or monthly. The choice of interval depends on analysis needs and data volume requirements.

How does the interval frequency chosen affect historical data collection?

Smaller tracking intervals result in larger amounts of data collected. For example, tick-by-tick data generates more data than daily closing prices, requiring more storage and processing resources.

What does 'EOD' (end of day) mean in the context of time series data?

EOD refers to end of day data, which typically captures the closing price or final values of an instrument at the end of a trading day, representing daily interval tracking.

What is the difference between intraday and interday data?

Intraday data tracks price or instrument changes within a single trading day (e.g., hourly or minute intervals), while interday data tracks changes between different days (e.g., daily closing prices or longer intervals).

What does 'mark to market' mean in the context of valuations?

Mark to market refers to valuing an instrument based on current market prices—actual buy or sell quotations observed in actively traded markets. It reflects real-time market prices rather than inferred or modeled prices.

How does mark to market differ from mark to model?

Mark to market uses actual observable market prices from active trading. Mark to model uses internal models and algorithms to infer and calculate a fair price when no active market prices are available, typically for illiquid instruments.

What is 'fair value' in valuation?

Fair value is an inferred or evaluated price determined either through mark to market (observable prices) or mark to model (modeled prices), representing what an instrument should be worth in the market regardless of whether an actual transaction occurs.

When would an analyst need to use mark to model rather than mark to market?

Mark to model is necessary in illiquid markets where instruments are not actively traded and no reliable market quotations exist. Examples include inactive or thinly traded bonds, derivatives, or specialized assets where buy/sell orders cannot be easily observed.

What is the primary difference between literal pricing and evaluated pricing?

Literal pricing represents actual transaction prices that occur in the market. Evaluated pricing is an inferred price based on analysis, models, or market data—it is not a price at which a transaction actually occurred but rather a calculated fair value.

Name two examples of vendors that provide valuation data and pricing information.

Common valuation data vendors include Bloomberg, Thomson Reuters (Refinitiv), FactSet, and Morningstar. These vendors provide market prices, evaluated pricing, and valuation models for various asset classes.

What is a credit rating?

A credit rating is a rating applied to a company, institution, or country that describes their creditworthiness and likelihood of repaying any debt or credit they have taken out.

Name three examples of credit rating designations from best to lower quality.

Triple A (AAA), Double A (AA), and Double B (BB) are examples of credit rating designations, with AAA being the best rating available from most rating agencies.

What is a credit rating agency?

A credit rating agency is an institution or entity that has been established to assess and assign credit ratings to companies, institutions, and countries based on their creditworthiness.

How do credit rating agencies determine the risk of repayment?

Credit rating agencies assess the credit rating of a company, institution, or country to determine the risk that lenders or credit providers face when deciding whether to extend credit or lend money.

What information do credit rating agencies provide about a country?

Credit rating agencies provide ratings on a country's overall debt level; for example, the United Kingdom may have a triple A or double A rating, which indicates creditworthiness to potential lenders.

What is the primary purpose of credit ratings in lending decisions?

Credit ratings serve as an indication for lenders and credit providers to assess the risk of providing credit or lending money to companies, institutions, or countries.

What is an index in financial markets?

An index is a benchmark calculation that represents the average or benchmark price of a particular market or set of instruments within a market, providing users with a sense of overall market performance.

What are the constituents of an index?

Constituents are the individual securities or companies that make up an index. For example, the FTSE 100 index constituents are the top 100 companies listed on the London Stock Exchange.

Why is an index calculated as a weighted average rather than a simple average?

An index uses weighted averaging because different companies have different market capitalizations and sizes. Larger companies are given higher weightings while smaller companies receive lower weightings to accurately reflect market representation.

How does constituent weighting work in index construction?

Each constituent's price contribution to the index is weighted based on its size or market capitalization. This means larger cap companies have greater influence on the index value than smaller cap companies.

Name three major companies that produce benchmark indices.

FTSE (Financial Times Stock Exchange), S&P Dow Jones Indices, and MSCI are major benchmark index providers.

What are three industry classification standards used for indices?

GICS (Global Industry Classification Standard), ICB (Industry Classification Benchmark), and NAICS (North American Industry Classification System) are major industry classification standards.

What is the primary function of a consolidated data vendor in the context of ESG data?

A consolidated data vendor aggregates multiple feeds of information from various sources such as exchanges, inter-dealer brokers, and electronic markets, delivering them as a single pipe of data to users.

Beyond consolidation, what other data capabilities do consolidated data vendors possess?

Consolidated data vendors can generate their own data through contributed data collection, employ analysts and reporters to build datasets from scratch, and create derived data through clever manipulation of multiple data sources.

Define ESG ratings in the context of environmental, social and governance data.

ESG ratings are quantitative or qualitative assessments of a company's environmental, social, and governance performance, typically generated by data vendors to evaluate corporate sustainability and responsibility practices.

What is the distinction between consolidated ESG data and derived ESG data from vendors?

Consolidated ESG data aggregates information from multiple external sources into a single delivery, while derived ESG data is newly created by vendors through analytical manipulation and combination of existing data sources.

Name at least two sources from which consolidated data vendors typically aggregate ESG information.

Exchanges, inter-dealer brokers, electronic markets, and other financial information sources that vendors consolidate into unified ESG data feeds.

What role does ESG reporting play as a data vendor offering?

ESG reporting involves vendors compiling and presenting environmental, social, and governance data in standardized formats that allow users to assess corporate sustainability performance and compliance with ESG criteria.

What is the key difference between 'news' and 'commentary' in financial information?

News is factual information about what is happening in the world, typically provided by newspapers and television. Commentary is analysis, insights, opinions, and thought about facts, companies, or countries—it interprets and evaluates news rather than just reporting it.

Why are news and commentary classified together as a category in financial data?

Both news and commentary are text-based, unstructured data, as opposed to structured numeric market data that is machine-readable.

Define 'unstructured data' in the context of financial information.

Unstructured data is text-based information (such as news and commentary) that is not in a standardized format and requires interpretation, unlike structured numeric data which is machine-readable and readily processable by computers.

What is the primary characteristic that distinguishes structured data from unstructured data?

Structured data is predominantly numeric, machine-readable, and can be directly ingested and understood by computers. Unstructured data (like text) requires interpretation and is not in a standardized format that computers can automatically process.

How is news being utilized in algorithmic trading?

News is used in algo trading as input to identify market-moving events, trigger trading signals, and inform automated decision-making systems about developments that may affect asset prices.

What is a News Sentiment feed?

A News Sentiment feed is a data stream that analyzes and quantifies the sentiment (positive, negative, or neutral) expressed in news articles and commentary, converting qualitative text into quantifiable metrics for algorithmic trading.

What is a Securities Master File?

A comprehensive database containing instrument reference data that serves as the authoritative source for all security information within an organization, including identifiers, characteristics, and issue details.

What does Enterprise Data Management (EDM) refer to in reference data context?

The systems and processes used to manage, maintain, and distribute reference data across an organization, typically provided by service providers who specialize in data management infrastructure.

Define 'Golden Copy' in reference data management.

The single, authoritative, and accurate version of reference data that has been validated and approved through data governance processes, which all systems and users access to ensure consistency.

How does data governance differ from data management?

Data governance defines the rules, protocols, and processes for how data is captured, stored, and maintained; data management is the day-to-day execution of storing, compiling, and accessing that data.

What is data lineage in reference data?

The historical record and traceability of data, showing when data was created, modified, and how it has evolved over time; enables understanding of data origin and transformation history.

What is a securities identifier?

A unique code or number assigned to a security to distinguish it from all other securities in the marketplace, enabling accurate identification and tracking.

Why is Twitter identified as a particularly important social media channel for financial information professionals?

Twitter has been the most important social media platform for tracking real-time information flows about companies, countries, and market-relevant topics, providing a competitive advantage to those monitoring it for emerging data and news.

What advantage does monitoring Twitter provide in understanding data flow about a particular topic?

Monitoring Twitter enables professionals to track unstructured text-based and visual information that may be indirectly or directly relevant to companies, countries, or markets, ensuring they don't miss critical information others might overlook.

How does Facebook function as a channel for financial information and market intelligence?

Facebook serves as a platform where individuals broadcast news and commentary, making it a source of unstructured data that financial professionals can tap into to gain complete understanding of information flows about specific topics or entities.

What types of content are typically found on social media platforms like Facebook in the context of financial information gathering?

Social media platforms contain unstructured text-based and photograph-based content that individuals generate themselves as news broadcasters and commentators, potentially containing relevant financial or market information.

What is the definition of alternative data in financial markets?

Alternative data is a catch-all expression describing newer types of non-traditional, non-typical data that have not been historically tracked but are now becoming of interest to financial professionals. It includes data that is indirectly relevant to market movements.

How does alternative data differ from traditional market data?

Alternative data is at variance with hardcore market data and reference data. It represents new and different types of data that are non-traditional, whereas market data and reference data are established, conventional sources.

What is the primary characteristic of alternative data in terms of its relationship to financial instruments?

Alternative data is primarily of indirect interest, meaning it indicates or signals where the price of an underlying instrument may move, rather than directly representing the instrument itself.

Why might the term 'alternative data' become obsolete in the future?

The term 'alternative data' may become obsolete because what is considered alternative today may become traditional in the future as these data types become standard practice in financial analysis and forecasting.

What does ISO stand for and what is its primary role in financial markets?

ISO stands for International Organization for Standardization. It develops and publishes standards that are adopted globally, including standards for financial instruments, identifiers, and messaging protocols used in securities trading.

Distinguish between 'de jure' and 'de facto' standards.

De jure standards are formally established and mandated by official bodies or regulatory authorities. De facto standards are those that have become widely accepted and used in practice through market adoption, even without formal official designation.

What does BIC stand for and what is its ISO reference number?

BIC stands for Bank Identifier Code and is defined under ISO 9362. It is a unique identifier used to identify specific banks in international financial transactions.

What is the purpose of CFI (Classification of Financial Instruments) as referenced in ISO 10962?

CFI (ISO 10962) provides a standardized classification system for financial instruments, enabling consistent categorization and identification of different types of securities and derivatives across global markets.

What is FIGI and how does it function as a financial identifier?

FIGI stands for Financial Instrument Global Identifier. It is a globally unique identifier for financial instruments that provides a standardized way to identify instruments across different markets and trading venues worldwide.

What does LEI stand for and what does it identify?

LEI stands for Legal Entity Identifier. It is a unique identifier assigned to legal entities that participate in financial markets, serving to clearly identify counterparties in financial transactions.

What does ESG stand for?

ESG stands for Environmental, Social, and Governance. It is a framework for tracking the performance of companies and institutions, enabling investors to align investments with their values and philosophy.

What is the primary purpose of ESG ratings in investment decision-making?

ESG ratings allow investors to evaluate how well companies or funds perform against environmental, social, and governance criteria, helping investors channel their investments according to their philosophy and values.

How do third-party institutions provide ESG ratings to investors?

Third-party companies provide ESG ratings using metrics similar to credit rating agencies (such as AAA scales), with their own defined conventions for determining good, bad, or average performance against ESG criteria.

Name one way investors can track or implement ESG-based investments.

Investors can consult third-party rating institutions that assess and rate companies or funds on their ESG performance, providing standardized evaluations to guide investment decisions.

What is the primary advantage of using real-time market data feeds integrated into Excel spreadsheets?

Real-time market data can be inserted directly into spreadsheet cells, allowing for automatic computation and dynamic updates without manual data entry.

Name two Microsoft applications mentioned for creating custom desktop applications with market data.

Visual Basic and Excel (with VBA - Visual Basic for Applications). Python is also mentioned as an alternative coding language for desktop applications.

How do desktop APIs add value to financial workstations?

Desktop APIs enable users to code custom applications that link with existing data feeds, creating local applications that enhance and transform the data already available on the desktop.

What is the key functional difference between local applications and centralized/shared applications on a trading network?

Local applications run on individual desktops, while centralized applications sit on network servers and provide functionality that multiple users can access and utilize simultaneously.

What types of applications would typically be deployed on a server device rather than locally on a workstation?

Applications that perform functions needed by multiple users across the network, providing centralized access and shared resources rather than individual user functionality.

Describe one way traders can implement real-time market data computations on their desktop without coding.

By using application toolkits that integrate with Excel, users can insert real-time market data into spreadsheet cells which then automatically compute based on formulas already in place.

What is the primary difference between streaming datafeeds and terminal-only solutions?

Streaming datafeeds provide continuous, real-time data flow directly into systems and applications, whereas terminal-only solutions require users to access data through a dedicated terminal interface without direct system integration.

Name three ways data feed providers typically structure their charging models.

Per physical feed, per site/location, and per country charges. More recently, providers also charge based on application types (e.g., trading system usage vs. risk management tool usage).

What are the main types of datafeeds and what determines their deployment in different use cases?

Types include market data feeds, reference data feeds, and trade execution feeds. Deployment is determined by specific use-case requirements such as trading operations, risk management, compliance monitoring, or portfolio analytics.

How does application-based charging for datafeeds work?

A single data feed may be charged differently depending on its application type—for example, the same feed could incur separate charges when used in a trading system versus when used in a risk management tool.

What is a Server API in the context of streaming datafeeds?

A Server API is an interface that allows client applications to connect to and receive streaming data directly from a provider's server, enabling real-time data integration without terminal dependency.

Why is it important to understand your data provider's charging policies and rules?

Data feed charges vary significantly based on site location, country, feed type, and application usage. Understanding these policies prevents unexpected costs and ensures appropriate budgeting for data subscriptions.

What is the primary advantage of using real-time market data feeds integrated into Excel spreadsheets?

Real-time market data can be inserted directly into cells within Excel, allowing for automatic computation and analysis of current market information without manual data entry.

Name two Microsoft tools mentioned for creating desktop applications that can link with data feeds.

Visual Basic and Visual Basic applications are Microsoft tools that enable creation of desktop applications to process and add value to real-time data feeds.

What is the key functional difference between local applications and centralized/shared applications in a network environment?

Local applications run on individual desktops and serve single users, while centralized/shared applications run on server devices and provide functions that multiple users can access simultaneously.

How can developers add value to desktop data using APIs and coding languages like Python?

Developers can write custom applications using languages like Python that link with desktop APIs to process, analyze, and enhance the value of data already available on the desktop through local applications.