(Correcting third paragraph below Monitoring Markets subhead to remove incorrect reference to Cayman Islands Stock Exchange in story from July 19.)
The U.S. Securities and Exchange Commission took a step toward improving its oversight of equity and options markets, contracting for a system that collects quote and trade data that is sold mainly to private users.
Regulators will be able to tap into real-time feeds of orders, quotes and transactions that are generated by exchange companies such as NYSE Euronext (NYX:US) and CBOE Holdings Inc. (CBOE:US) and were, until now, used primarily by banks and automated trading firms. Tradeworx Inc., a high-frequency firm and technology vendor in Red Bank, New Jersey, will deliver a platform this year that can compile the data under an SEC contract.
The initiative to enhance access to trading-related data is separate from a much broader market oversight project known as the consolidated audit trail that SEC commissioners voted to mandate last week. That plan, years away from implementation, will let regulators monitor an order’s “life cycle,” including information circulated before it gets to an exchange or another venue, or is canceled. That project, which will capture information the morning after it occurs, will also identify the firms making trading decisions.
The new system will give the SEC the “same speed, ease and reliability of data collection and analysis that is available to sophisticated market participants,” the commission wrote in its initial specifications report. “The solution shall allow SEC staff to collect, store, aggregate, monitor, query, manipulate and analyze equity and equity option data.”
The fee for the market-data system is $2.5 million for the first year, Manoj Narang, CEO of Tradeworx, said in an e-mail.
The new market-data project, for use by as many as 100 people at the agency, will allow the SEC to monitor trading and hunt for abusive activity. The SEC may generate hundreds of daily queries about trading activity, the regulator told vendors in response to questions last year. It asked companies submitting bids to ensure that data feeds from the futures markets could be integrated into the system.
Securities Technology Monitor, a trade publication, first reported the SEC’s selection of Tradeworx for the platform.
Under the program, real-time trade and so-called depth-of- book data will be collected from all 13 U.S. stock exchanges and the Options Price Reporting Authority, according to the SEC’s initial specifications. Depth-of-book data refers to quotes and orders at prices inferior to the best levels on each market and includes the number of shares or contracts available at those prices. Public quote and trade data would also be captured.
The SEC said it wanted the ability to analyze data at intervals such as 1 thousandth of a second, 1 second or 1 minute. The SEC’s division of trading and markets and the division of risk, strategy and financial innovation will use the system, the agency said.
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