Market data refers to the electronic streaming of prices, volumes and related information used for the trading of securities. Most market data emanates from trading venues such as stock and derivatives exchanges while reference data comes from issuers and is usually collected by market data vendors. Firms perceive price data via ticker symbols.
Firms can retrieve up-to-the-millisecond market data and historical reference information about public companies, foreign exchange rates, equities, fixed-income instruments, financial derivatives and for high-frequency trading (HFT) strategies. Such information provides traders and investors with a foundation for performing a variety of transactions and managing financial assets.
The dispersion of market data requires a matrix of feed handlers, hardware, networking and software applications, including ticker devices that govern the delivery of market data. Market data also includes the information that is gathered and distributed through key indexes.
Market data quotes are generally divided into two major categories: Level 1 and Level 2.
Level 1 market data provides investors with basic trading information, such as the lowest ask and highest bid prices, which is the basis for discerning the Best-Bid-Offer data.
Level 2 market data provides a view into the market players making the best bids and ask prices for a security that is attracting market attention. Level 2 market data also provides trading firms and investors with information useful for keeping track of moving securities, trading systems and volume-based trading platforms. Such information can also help investors review the details of other, generally less competitive stocks.
In addition to Level 1 and Level 2 market data, other systems of providing market data include: market by order (MBO), which sorts all orders available by price, combined view MBL/MBO, which combines market by order and market by level and consolidated order book, which consolidates all orders based on type into one data feed.