Quote from ljyoung:
On Friday I spoke with the CME and several retail data vendors. As best I can put things together, market data "leaves the CME floor" in one of the three formats mentioned earlier.
The commonest is ITC which has compressed tick data and is the slowest. This is the so-called industry standard. Although I did not ask CME this, my guess is that it is also the cheapest.
Next is the RLC format which is faster and which shows all ticks. It is the one used when a DOM is part of the package a vendor offers you. It is also faster than ITC.
The last is Fix/Fast which is the fastest and theoretically the quality of the data should be the same as RLC, i.e., all the ticks. This is the feed that the very high end vendors will have and is tailored for the major players (and the price reflects that). The CME people said that as yet no retail vendor has this format in place although the goal is to have all retail vendors with this format within the next 1-2 years.
The raw market data makes its way to your computer in a variety of ways and in the best of all worlds you would have your computer about 2 inches from the floor of the exchange (that's what all the major players try to do). Well that isn't going to happen so the next best thing is to have the initial processing point for the raw data which your vendor supplies you as close to its source as possible and for that data to get to you with the least amount and/or likelihood of delay.
If you live in Fort St. Nowhere you should not get your data as quickly as if you live in Chicago. On the other hand if the Chicago vendor has ineffective servers (for whatever reason) and interfaces with clients using a dial-up connection, you will get your data more quickly if your data vendor has top of the line servers and you have a "direct" high speed internet connection (T-whatever) to him.
Where most of the lag comes in, IMO, is in the "vendor to you" part of the route. This is where you will pay money to get faster data transfer and if you're paying for it and not getting it, then the most likely culprit is your data vendor and not the CME or the internet (in the form of your ISP). Clearly the faster the download speed from your ISP the better. Better yet if you have the money get yourself a T-whatever connection to the net or "directly" to your data vendor. Most people will have a cable-modem service with download speeds of 1-10 Mbps.
So how can you tell if you are getting slow data? One way is to ask your data vendor. The other is to do a test where you compare data vendors (the vast majority of these businesses have 30 day trials) and find out for yourself. Use an unfiltered T&S readout and compare times and quotes. To check things out in a fast market you can do what I did and use a filtered T&S (this just cuts down on the number of data points) and compare times to the peak extremum of the response.
Note well that here I am talking about so-called "first tier" data vendors and if you're getting data from lower end vendors then LofL and LOL - you will be losing before you even place a trade. So get smart and spend some time and money to find the best vendor you can at this point in your career, and then try and trade. Do not let some numnutz tell you that you are trying to "get an edge which isn't there". Unless you do this or something like this you will be starting with less than the necessary box of tools to try and beat this game. All the nifty software, ingenious indicators and guru advice will be to no avail. If your data sux then so will your P&L.
As always, with anything I say, please feel free to challenge it with impunity, reckless abandon and better facts.
lj
Note: I appreciate that there are ways to fine tune the speed at which you get your data and as well that there are some things which you simply can't control.
