How Market Data Works

It is very rare for the charts in any trading platform to match charts from other platforms or brokers. Hence, It is not an uncommon experience for the traders to find prices on one chart to look different when compared to other sources. This often puts a trader in a situation to raise questions like these- “Why does my U.S stock data seem incorrect? Why is my stock data delayed?”

The reason can be traced back to how the market data works. In this document, we will discuss the top four reasons behind this variation in the price across different sources.

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#1 Matching Buyers & Sellers

Trading is the process of matching buyers and sellers. This matchmaking happens simultaneously on numerous exchanges for the same stock at the same time. A buyer and seller can be matched on the NASDAQ exchange, creating one last price, while at the same time as another buyer and seller are matched for the same stock on the NYSE exchange, creating a slightly different last price. While the market is generally efficient at keeping prices very close to each other across various exchanges, there is no official or standard price for any particular asset at one time. It depends where the trade is executing, with whom, and on what network.

#2 Dark Pool Trades

The dark pool is an alternative trading system that observes the execution of confidential trades by the institutional investors outside the purview of the public exchanges like NYSE and NASDAQ and the general investing public. The dark pool trades are organized privately and hence, this trading data is not reported in the same way as normal trades and sometimes never makes its way out of the broker and is thus not reported to the exchanges. This leads to the “missing” trades and price action on other exchanges, creating price variations.

#3 Routing Orders

Trading activity that is routed to NYSE may not be immediately reported on other exchanges such as NASDAQ. Furthermore, it is important to note that brokers also buy the data from different sources, for example, Broker A might buy the data from NASDAQ, while Broker B might buy data from NYSE. As a result, what you’re looking at on your charts does not sketch the market as a whole on any platform or in any broker but just an abstract of it.

#4 Trades Within Same Brokerage

Within every brokerage, there are some trade actions that take place between the users of the same broker. For example, two TD Ameritrade users might take the opposite sides of the same trade where one buys and another one sells, a transaction that would never leave the broker and would generally not be reported to the exchange until settlement time.

As a result, if you will look exclusively at the New York Stock Exchange data, you will not be able to view the trades that happened on NASDAQ because they were never reported to NYSE. Some symbols like Amazon (AMZN) mostly trade over the NASDAQ and hence, NYSE data for these stocks will not look clear as data from NASDAQ might.

Market Data Delivery at TrendSpider

Two of the biggest financial securities markets in the United States are NYSE and NASDAQ. The NYSE captures 30% of all the trading activities in the United States, NASDAQ covers another 30%, and the rest of the territory is covered by the remaining exchanges like the Chicago Board of Options Exchange (CBOE), Boston Stock Exchange (BSE), Chicago Stock Exchange (CHX), etc. TrendSpider uses both NASDAQ and NYSE data, but in different ways.

The data collected from NYSE is delivered in real-time and is used to power real-time updates to your charts, alerts, etc. The data collected from NASDAQ is served after a 15-minute delay and is used to add additional liquidity to the house price data on your charts. This is a unique form of “blending” performed by TrendSpider to give our customers more liquidity in the data they see on their charts. When the market data from these two sources are combined together, it makes any time frame above 15 minutes more complete because it will represent about 60%-70% of all the U.S trades.

Sep 16, 2022

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