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Relationship - Data Feed, Platform, Exchange, etc
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Relationship - Data Feed, Platform, Exchange, etc

  #11 (permalink)
Membership Temporarily Revoked
Boston, MA
Futures Experience: Intermediate
Platform: NT7
Favorite Futures: CL, RB, LE
Posts: 264 since Apr 2014
Thanks: 102 given, 174 received

noobforlyfe View Post
...I thought your broker provides you the "acutal" license to physically enter a trade and exit.

The data feed company provides the chart, so you can look at it and make your decision whether to enter or not.

and lastly you do all of this on a trading platform/ software.

I really can't explain it further, a broker would be able to provide you with more accurate information. It's weird, but not so weird as to be scary.

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  #12 (permalink)
Membership Temporarily Revoked
Boston, MA
Futures Experience: Intermediate
Platform: NT7
Favorite Futures: CL, RB, LE
Posts: 264 since Apr 2014
Thanks: 102 given, 174 received

Sorry noobforlyfe, let me get to the brass tax, as per your question and try to explain it further, as best I can with my limited knowledge.

In order to trade live, you need a software trading platform. Check.

You then need a source for your live streaming data. That is your data provider. Check.

You then need a broker that can facilitate your trades for you. Check.

You now need a broker that supports your trading platform (software) and data feed. Check.


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  #13 (permalink)
Elite Member
New York, NY
Futures Experience: Beginner
Platform: thinkorswim
Broker/Data: TD Ameritrade
Favorite Futures: Stocks
Posts: 958 since Jul 2012
Thanks: 640 given, 1,959 received

To trade electronically at your own discretion in a centrally cleared market (I'm going to exclude OTC), you must have at least these 3 components:

(1) Clearing and settlement
(2) Order execution
(3) Data feed

Clearing and settlement: Only clearing members can clear a trade in a venue or its affiliated clearinghouse. However, it's expensive to become a clearing member. So, to access a clearinghouse, a trader usually has to have a client account agreement with a clearing member like directly or indirectly. A firm like GS or JPM is a clearing member, so if you have a futures client account with them, they can clear directly for you. There's also brokers who aren't clearing members, so they can clear for you through an arrangement they have with a clearing member.

Order execution: To place orders electronically at your own discretion, you would want your broker or clearing firm in the step above to provide you with direct market access. Most brokers provide this. But there's many different sub-categories of "direct market access". All retail brokers (that I know of) give a restricted form of direct market access where they carry out margin control and risk checks inline for their retail clients.

However, it's expensive for your broker provide the infrastructure for direct market access themselves. You need to host physical servers, manage network connections, monitor and manage risk checks, write software pass exchange-side testing requirements and so on. A 2-3 person introducing broker shop certainly won't have the software engineers to do this - generally, they outsource this to the clearing firm who may outsource it to someone else! And even a large broker like UBS may not have internal software expertise for this. On the other hand, there are smaller brokers like Lime Brokerage that provide their own infrastructure here.

So, many brokers like to outsource the order execution infrastructure to a vendor that writes order execution software - TT, Rithmic etc. are common examples of software providers whom brokers outsource their market access infrastructure to.

This gets even messier because it's also expensive for the order execution software provider to write their own market access infrastructure! Behind the scenes, a software provider like TT may outsource parts of their infrastructure to other vendors like Informatica, B2Bits or TIBCO and put the pieces together in whole white-labeled package.

Data feed: Just as a bank may provide both lending and checking services, a software provider may provide order execution, or market data, or both. If your broker does not provide their own order execution, chances are that they don't provide their own market data either...

To recap:
- There are companies that strictly provide market data only, like IQFeed.
- There are also companies that provide both order execution and market data, like Rithmic or TT.
- There are brokers that partner with a clearing firm like Dorman Trading, who further outsource to a firm like TT to provide market access infrastructure.
- There are brokers that are clearing members that also provide both order execution and market data, like Interactive Brokers.

This brings me to an unmentioned 4th piece, that is not absolutely necessary for direct electronic access, but most retail traders nevertheless require:

Interface: This is whatever you use to point-and-click (for discretionary traders) or write a program (for automated traders) against to place orders and receive market data. The interface may be bundled with the vendor that develops the data feed or order execution infrastructure, like Rithmic's R Trader, IB's TWS, or it may be a "vendor-neutral" (poor choice of word here, because it actually doesn't just hook up to every possible vendor - it just hooks up to a predetermined group of vendors) platform like Sierra Chart or NinjaTrader.

A retail trader may mix-and-match the above for his needs: NinjaTrader because he's used to its charting and point-and-click interface and TT for order execution because that's what his clearing firm provides, but also IQFeed for market data because there may be historical data needs that TT doesn't provide.

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  #14 (permalink)
Trading Apprentice
berlin germany
Futures Experience: Beginner
Platform: Ninjatrader
Favorite Futures: ES VIX
Posts: 35 since Jul 2016
Thanks: 19 given, 6 received

thanks a lot for the nice explanation!!!

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