How Smart Options Delivers Cost-Effective, Scalable Options Data

Options trading volume is soaring. According to the Futures Industry Association (FIA), global futures and options trading grew 32% to a record high level in the first half of 2020 alone, compared to 2019. As part of that growth, trading of equity index futures and options rose 51%.

Options continue to gain a bigger investing audience as trading tools become more accessible and fees decrease.

Yet accuracy and speed of options market data are crucial. In this arena, firms can face significant cost and hardware barriers to getting efficient, cost-effective options for data delivery. Not only might these impediments affect their own trading strategies, but they may also ultimately impact the customer experience and stymie product innovation.

As a solution, Nasdaq launched Smart Options, a service for easier access to essential, real-time options market data. Let’s take a look at how firms can take advantage of Smart Options and enjoy its streamlined benefits.

The current state of options data

The importance of real-time, accurate options data is invaluable for any trader in the options market. Optimal execution depends on trading at the desired price, so even the smallest amount of latency in the listed data traders are basing decisions on can wreak havoc.

As it stands, firms have essentially one way to get vital options data: through the Options Pricing Regulatory Authority (OPRA).

OPRA is a securities information processor (SIP) that works similarly to SIPs for equities market data. That is, OPRA collects, consolidates and disseminates data from exchange-traded securities options. It publishes last sale information on executed trades and best bid and offer (BBO) data from 16 options exchanges in the U.S.

While OPRA provides essential and robust data, access comes at a price. OPRA data is only available as a bulk data package, with one month of data typically weighing in at between 800GB and 1TB, and up to 50 billion messages being generated daily.

Due to the nature of this structure, firms face costs in two ways: for purchase of the data (i) and for technology investments to ensure they have the hardware necessary to handle both the immense dataset and the velocity in which it is generated (ii).

Firms feel the burden of bulk data and fees

The infrastructure demands and costs can be burdensome on firms, if not downright prohibitive for some, all but preventing them from setting up a scalable data stream for real-time options trade and quote information.

For example, while firms are paying for 100% of all OPRA data, they might not use or have a use for it all.

“Many people have no need for the microdata included [in the OPRA data feed]—it’s just not part of the trading decision-making process,” Jay Vanerstrom, vice president and manager for derivatives at CAPIS, told Traders Magazine.

Additionally, firms or individuals looking to use OPRA for options data can endure other fees beyond the base costs for data access and hard drives. For example, firms that redistribute OPRA, whether on a current or delayed basis, owe a monthly fee. There are also fees to consider for data handling, hosted solutions and direct access.

A cost-effective, scalable options data alternative

In comparison to the rather rigid and costly nature of OPRA data access, Nasdaq’s Smart Options is a service designed to provide cost-effective and streamlined options data. Ultimately, Smart Options can help users save upward of 80% of the bandwidth requirements for OPRA, returning valuable time and cost savings to organizations.

At a high level, Smart Options means more flexible and scalable data access for a fraction of the infrastructure needed for OPRA bulk datasets. Smart Options does this by breaking out the data for individual BBOs, thereby reducing data overload and downsizing delivery. However, the service still supports delivery for national best bid and offer (NBBO), as well as last sale trade and administrative messages.

The result is a curated data feed that’s shaped to more closely fit the needs of firms and their customers. Nasdaq Smart Options:

• Reduces overhead associated with one-sized OPRA access.
• Allows users to view the same critical information without the burden of sifting through the full dataset.
• Enables firms to more nimbly manage increasing data rates.

Importantly, Smart Options is now available via the Nasdaq Cloud Data Service (NCDS) in order to better help firms quickly and efficiently meet client demand. NCDS is a real-time streaming data service delivered through a suite of APIs hosted in the cloud. Created to deliver lower latency and higher performance, NCDS enables firms to receive data products through open-source delivery standards, rather than relying on traditional hardware and connectivity — providing a dramatic reduction in time to market. Given the dynamic nature of current markets, cloud integration could be all the more advantageous, easily allowing firms to scale up resources on-demand when surges in trading activity or client demand occur.

Users also have the option for local access from metro area NYC Nasdaq data centers or through a redistribution partner.

“As a data provider, it’s important that we supply our clients with the information they actually need, and in ways that they can use most effectively,” said Christian Amott, chief technology officer of QuoteMedia, a leading provider of market data feeds. “Nasdaq Smart Options enables us to reduce excessive ‘noise’ in our options quotes, with a far more concise display of information, making it easier to see what is really happening in the options market. We provide our clients with a greatly improved user experience.”

Market transparency and democratization of data access are key 21st-century investing themes that Nasdaq continues to hold core to its mission. Smart Options is a deployment of that vision, bringing more cost-effective access to real-time, accurate trade and quote information, which can have the ultimate impact of bringing more participants to the options market.

Want to learn more about Nasdaq Smart Options or how you can bring the data feed to your own firm and customers? Contact Nasdaq today for more information.