What is High-Speed Data Feed?

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High-speed data feeds transmit data such as price quotes and yields without delays and are used in high-frequency trading (HFT) for real-time data analysis.These data feeds may be transmitted over fiber optic cable, microwave frequency broadcast, or via co-location at exchange server sites. Since HFT profitability depends on low latency, these and other financial firms have collectively invested billions of dollars in building upgraded high-speed data feeds.

Definition

High-speed data feed refers to a method of transmitting data such as price quotes and earnings without delay, primarily used for real-time data analysis in high-frequency trading (HFT). This data transmission is achieved through fiber optic cables, microwave frequency broadcasts, or co-location at exchange server sites to ensure rapid data delivery.

Origin

The concept of high-speed data feed developed with the rise of high-frequency trading. HFT became popular in the late 1990s and early 2000s, and as technology advanced, trading speed became a critical competitive factor. To meet this demand, financial companies began investing in faster data transmission technologies.

Categories and Features

High-speed data feeds are mainly categorized into three types: fiber optic cable transmission, microwave frequency broadcast, and co-location. Fiber optic cable transmission offers stable high-speed connections suitable for long-distance data transfer; microwave frequency broadcast is ideal for short distances requiring extremely low latency; co-location involves placing trading servers near exchanges to minimize latency. Each method has its pros and cons: fiber optics are costly but stable, microwave frequencies are weather-dependent, and co-location requires additional infrastructure investment.

Case Studies

A typical case is the high-speed data transmission between the Chicago Mercantile Exchange (CME) and the New York Stock Exchange (NYSE). To reduce latency, many HFT firms have established dedicated fiber optic lines between these exchanges. Another example is the microwave transmission line between London and Frankfurt, used to reduce data transmission time between major European financial centers.

Common Issues

Common issues investors face when using high-speed data feeds include high costs and the complexity of technical maintenance. Additionally, weather conditions can affect the stability of microwave transmissions, while co-location requires complex coordination and permissions with exchanges.

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