On July 31, 2017, TradingSchools.Org published a blog post titled “Battle Of The Datafeeds.”
The blog post asked a very simple question – which Futures trading data feed and order routing was the fastest for the ‘average’ retail trader?
Many folks probably do not put much thought into which data feed they select. Instead, they put more thought into which Futures brokerage they should use. And more importantly, which Futures brokerage is offering the cheapest commissions.
We all want to pay the lowest commissions for our Futures trades. In fact, I have yet to find a Futures brokerage that did not swear to Jesus that they, in fact, are the lowest priced Futures brokerage on planet earth.
However, once you have selected a Futures brokerage, the Futures brokerage is going to ask you a very important question… “which data feed and routing do you want to use?” Most folks react to this question like a deer gazing at the headlamps — as the car is wildly moving in its path.
It’s an important question. And truth be told, brokers always proclaim that “Datafeed A is better than Datafeed B” etc. But how does the broker really know which data feed and routing is the fastest? Do they have any empirical data to offer? Nope. At least, I have never found a broker willing to offer any such data.
What is the Futures Data Feed and Routing?
After you open your Futures trading account, you will have to select data feed and routing. What does this mean?
Datafeed is the raw data that is being delivered to your computer. It’s those numbers that slide across the screen, quickly posting prices higher and lower. Nobody wants a slow data feed. Imagine for a moment if you are making your decisions based upon data that is 1 or 2 seconds slower than everyone else. This puts you at an information disadvantage. Trading is a game where everyone is jockeying for the most relevant data to base a decision.
A slow data feed is akin to making your investment decisions based upon yesterday’s newspaper. It is pretty much useless. So, you need fast and fresh data without interruption.
Additionally, you also need a fast order routing pipeline. What does this mean? When you place your order on your trading screen, where does that order go? Have you ever really thought about it? Does it go to the broker in Florida where its parsed for “risk management” and then forwarded to an internet pipe in Los Angeles, and then is finally sent back to the Chicago Mercantile Exchange in Aurora Illinois? These are important questions. Remember, the faster your order can hit the order book at the Chicago Mercantile Exchange, then the faster it can be filled.
Getting your order filled at your price is devastatingly important, especially if you are day trading. If your order entries and exits are even a fraction of a second slower than everyone else, then you are pretty much fucked. You are the last guy in line at the buffet. By the time you get to the unlimited shrimp cocktail, it has disappeared. And all you get is the unlimited orange chicken. Not cool.
So now, we have talked about data feed and order routing — for Futures contracts. Lets now talk about a recent test that TradingSchools.Org performed, in hopes of sussing out the truth.
Testing “The Big Three” Futures Data Pipe and Routing
For our test, we thought it appropriate to test the most popular, in terms of retail traders. Yes, we could have tested some of the smaller brands, but their market share was either too tiny or too expensive for the average user to contemplate using.
With this in mind, we tested Rithmic, Interactive Brokers, and CQG. These are undoubtedly the largest players for the common retail trader.
The next step was to create a controlled environment. This controlled environment included three brand new laptop computers purchased at Walmart. Nothing fancy here. In fact, each laptop was purchased at $150 each.
Once we had the fresh laptops on the table, we installed the Trade Navigator program, which would be used to execute the trades.
A very simple trading system
Next, we created the worlds most simple automated trading strategy.
The strategy was as follows:
- At the open of any 1-minute bar, enter on a limit to buy one Emini SP500 futures contract, at 2 ticks below the open of the one minute bar.
- Exit the trade, on a limit of 2 ticks above the fill price.
- Repeat the process every 1-minute.
In essence, we were simply wanting to see if Rithmic, Interactive Brokers, or CQG could “pick off a tick” while the others were not able to get the order filled.
For the test, we executed 300 trades.
First, let me state for the record…this is not a truly controlled scientific test. There are a myriad of factors that can, and do, influence a data feed and order entry system. These results really need to be taken “with a grain of salt.”
A true scientific test would have required that we house a server from within the data center inside the Chicago Mercantile Exchange’s Aurora data center. However, the cost would have been thousands of dollars and would have required thousands of trades being executed. The more data you have, the more reliable the statistical inference. I don’t have that sort of money.
Instead, this test should be taken as from an unsophisticated moron operating in his garage. (which is true)
So what did we find? Over the course of executing 300 trades…(drum roll please)…we discovered the following…
There was absolutely no difference between Rithmic, Interactive Brokers, and CQG. Each provider was able to deliver the exact same result.
Isn’t this just depressing? You read all the way through this article, and you were expecting some sort of grand climax. And all you got was a pithy draw.
Which should you choose?
Considering that we could not find a real difference. The question then becomes, “If they are the same, why should I spend a higher fee for data and order routing?”
Yes, the fees between all three are comparatively equal, so then the question becomes, “which broker gives me the best service?”
And now, we are back to ‘square one’. Thanks for reading. And sorry for the unclimactic ending.