May 25, 2012 – The advance of technology across all sectors of the economy is ruled by what is known as Moore’s Law.
That was the observation, which has held true over decades, by Intel founder Gordon Moore that the number of transistors that can be placed on an integrated circuit doubles and will continue to double every two years.
Then there is the observation of Avi Kalderon, senior vice president of technology at the Financial Industry Regulatory Authority, which regulates brokers.
At the beginning of 2011, he told Securities Technology Monitor, at the organization’s annual conference in Washington, D.C., the amount of market data being sent in by national exchanges for FINRA’s internal data store was doubling, on an annual basis. Twice the rate of Moore’s law.
By the beginning of 2012, the rate had gone up to an eight-fold increase, per year. Or 16 times the rate of Moore’s law. That has subsided a bit, in recent months, Kalderon said. But by the end of this year, its data store will have pass one petabyte of market data on hand.
That is a quadrillion characters of information – and equivalent to five times the amount of information held by the Library of Congress.
FINRA operates an Order Audit Trail System (OATS), as an integrated audit trail of order, quote, and trade information for stocks. As of October 17, 2011, FINRA required its member brokers to report to order information for all national market system stocks and over-the-county equity securities.
The OAT system is being promoted by FINRA and other market participants as a possible foundation for the creation of the consolidated audit trail being pursued by the Securities and Exchange Commission.
That system would gather all trade and quote information from national markets, consolidate it and deliver it in real time, both to regulators and market participants. SEC chairman Mary L. Schapiro originally estimated that system would cost $4 billion to create and $2 billion to maintain.
But industry executives have said the cost could come down if OATS was the starting point – and real-time delivery of trade information was cut back to less frequency.
That has been generally defined as end of day information. But an SEC official told Securities Technology Monitor this week that the federal regulator may start out with a reporting requirement that the information be sent in within 15 minutes of the transaction time stamp.
Even though the amount of market data is not at the moment hurtling ahead at the eight-fold annual rate of increase, that won’t last, Kalderon said.
“It’s all about spikes,’’ he said, after a discussion of broker-dealer technology. “Once you hit a spike, you’re bound to get back to it. If the world generated that amount of data, the world will generate it again. And it will generate it again soon.’’
FINRA is the successor to the National Association of Securities Dealers, Inc. (NASD). Its Order Audit Trail System originally kept track of trade information on the National Association of Securities Dealers Automated Quote system (Nasdaq).
Last year, in what appeared to be a possible prelude to setting up OATS to be the starting point for an industry-wide audit trail, FINRA starting taking in data from the New York Stock Exchange's Order Tracking System.
The NYSE now has phased out its OTS.
This article originally appeared at Securities Technology Monitor.
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