14 September, 2021
The Safety of Maths: Integrating historical pricing data and analytics capabilities into EMS for buy-side traders

In order to meet the buy-side’s appetite for historical pricing data, a fintech collaboration between BMLL and FlexTrade seamlessly integrates BMLL’s Level 3 data and analytics capabilities into FlexTrade’s execution management system - all at the point of execution.


For many years, there has been a huge appetite for data on the buy-side, incorporating alternative data sets, real-time data sets, proprietary data sets and more. Indeed, forty-one percent of buy-side firms, typically with 10-50 billion assets under management, have indicated that they are planning to significantly increase their budgets for historic data over the next 12-18 months, according to a recent report by WBR. What the buy-side is particularly interested in, however, is how they can integrate more insightful data ultimately to the place that they need it - at the point of trade execution. Whilst having historical pricing data and analytics capabilities at their fingertips provides an extremely powerful tool, how can these enriched data sets be augmented into a trader’s workflow?
 

Predictive power

It's worth noting that this historical pricing data refers to Level 3 data. Level 3 data is a unique data set incorporating every single order message across every single venue across the entire lifecycle of an order. For example, did the order get filled or cancelled? How long did an order rest on the order book across various venues? What is the probability of an order getting filled on a particular stock on a particular venue? Whilst the buy-side is looking for new ways all the time to access this kind of predictive data and the associated analytics, up until now they’ve lacked the resources to implement Level 3 data. This means that this level of depth of predictive data has remained the preserve of only the most sophisticated resource-rich systematic firms. 

Further, buy-side firms want access to latest innovations in data and analytics without having to do the engineering work themselves or interrupt their own existing workflows. Specifically, if this historical pricing information is made available to the buy-side at the point of execution, it becomes even more powerful. In other words, actionable historical Level 3 data has a real influence on real-time trading, when traders are actually making their decisions. 


Historic data influences real time trading

That is why FlexTrade Systems has teamed up with BMLL Technologies, making BMLL’s unique Level 3 data and analytics available in FlexTrade’s Execution Management System, known as FlexTRADER® EMS. Using the underlying data science from its lab, BMLL’s Data Feed is pre-computed Level 3 granular order book data  and provides market participants with actionable insights focused on market quality and execution performance as well as available liquidity at different depths of the book. 

When Level 3 data is teamed with real time data in the FlexTrade platform, much more informed decisions can now be taken about order placement, in addition to algo selection and order adjustments throughout the history of the trade. For example, traders might originally decide to route to either one venue or algo, however, they can adjust their trading strategies in real time using informed insights at the point of execution. 

The focus here is on actionable intelligence rather than speed. Because BMLL’s data is integrated on an API basis, there is no need for it to come in as raw market data via super low latency feeds. It is more important that the data is delivered in an easily consumable way  to help traders determine what action they want to take now and in the future. The BMLL/FlexTrade partnership accelerates that whole journey and the use of predictive insights for the buy-side can be achieved. In addition, once traders understand the level of predictive power that comes out of Level 3 data, they typically want access to an increasing number of analytical tools. These are currently available in BMLL’s library made up of over 400 analytics, most of which have been developed to meet specific requests from clients. . The ease of our API integration with FlexTrade means increased flexibility for those end clients. They can consume this data and analytics either as a data point or visualisation. 


Augmented trading: faster, better, stronger

Ultimately, the BMLL/FlexTrade partnership gives the buy-side eyes on the granular Level 3 data they need at the point of execution. And it is by working with technology, and utilising all the benefits of interoperability, that financial institutions can make trading  better and stronger. 

Interestingly enough, when buy side traders then have a better understanding of market microstructure in terms of how markets actually behave, they trade more because they can better understand how a particular venue is behaving and how they can improve their execution strategies. That’s the safety of maths - a better understanding of previous events will have an influence on what is going to happen tomorrow. And you can only really get that insight from granular Level 3 data.

 

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