Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in and Co-Creator of Algomojo (Algorithmic Trading Platform for DIY Traders)

Different Types of Market Datafeeds and How it is used/consumed by traders?

4 min read

Data feeds are a source of real-time or delayed market data provided by exchanges to traders and investors. These data feeds can include a variety of information, such as the current bid and ask prices for a security, bid and ask size, the volume of trades being executed, and the last traded price.

There are several types of data feeds that exchanges may offer, including:

Level 1 data feed:

This type of data feed includes the current bid and ask prices for a security, as well as the volume of trades being executed. Mostly Level 1 data is offered by Datavendors/Charting Platforms like Tradingview and financial portals like Yahoo Finance, Google Finance, Bloomberg, Moneycontrol etc. Data vendors in turn distribute level 1 Datafeed to their end customers to trading platforms like Amibroker, Ninjatrader, Metastock etc for charting and trade analysis or signal generation purpose.

Media channels like CNBC TV18, NDTV Profit, Bloomberg also the users of Level 1 Datafeed to display real-time tickets in their respective TV channels.

Level 1 – Datafeed

Level 2 data feed:

Level 2 data feed refers to a type of real-time financial data feed that provides more detailed information about the prices and orders of securities than a Level 1 data feed. It typically includes all of the information included in a Level 1 feed, such as the best bid and ask prices and the size of the orders at those prices, as well as additional information such as the prices and sizes of orders at other levels of the order book, and the identities of the market makers or other participants making those orders.

Level 2 Datafeed – 5 depth

When comes to Indian Markets Level 2 datafeed is mostly offered to exchange members (brokers) at free of cost to distribute through their trading platform for their trading clients to take trading decision.

The cost of a Level 2 data feed for the US markets can vary depending on the source and the specific features and functionality included in the feed. Some brokers and financial data vendors offer Level 2 data feeds for a fee as part of a larger package of financial data and trading tools, while others may offer them on a subscription basis. Prices can range from a few hundred dollars per month to several thousand dollars per month, depending on the level of data and functionality included in the feed.

There are also some free or low-cost options for accessing Level 2 data in the US markets. For example, some exchanges and market centers, such as the NASDAQ, provide Level 2 data feeds to the public at no cost. In addition, some trading platforms and financial websites offer limited access to Level 2 data for free or at a discounted price. It’s worth noting that these options may not provide the same level of depth and detail as a full-featured Level 2 data feed from a financial data vendor.

Depth of the market, also known as the order book or the Level 2 quotes, refers to the range of buy and sell orders available for a particular security or asset at a given time. It provides a real-time snapshot of the supply and demand dynamics in the market, and can be used to gauge the liquidity of a particular security or asset.

The depth of the market is typically displayed as a list of buy and sell orders, with the prices and sizes of each order listed. When comes to the Indian Market – Level 2 data feed covers upto 5 depth. i.e Top 5 bid and ask price from the orderbook

Level 3 data feed:

A Level 3 data feed includes all of the information provided in a Level 2 data feed, as well as information on the individual trades being executed, including the price and size of each trade. Level 3 data in India is provided by some Top brokerage houses like Zerodha, IIFL, 5Paisa

Level 3 Datafeed- 20 depth


Historical data feed:

This type of data feed provides access to historical market data, such as past prices and volumes for security. Mostly historical Datafeed is offered for backtesting purposes by the exchanges. Brokers procure the historical datafeed at times to show larget historical datafeed in their charting platform and offer it to their clients.

Tick-by-tick data feed:

TBT feeds, or Trade By Trade feeds, refer to real-time data feeds that provide detailed information about every individual trade that takes place in a particular market or security. These feeds can be used by professional traders and investors to get a detailed view of the supply and demand dynamics in the market, and to make more informed trading decisions.

High-frequency traders (HFTs) are firms or individuals that use advanced computer algorithms and high-speed connectivity to trade securities at very high speeds, often executing a large number of trades in a very short period of time. HFTs are known for their use of advanced technology and sophisticated algorithms to analyze and interpret market data and for their ability to execute trades at very high speeds.

TBT feeds can be useful for high-frequency traders, as they provide detailed information about every individual trade in real time. This can allow HFTs to quickly analyze and react to changes in the market, and to identify trends and patterns that may not be apparent from more aggregated data sources. It’s worth noting that TBT feeds can be very expensive, and are typically only used by professional traders and institutional investors with significant trading volume.

Delayed data feed: This type of data feed provides access to market data that is not in real-time, but is delayed by a certain amount of time. Trading portals like tradingview, investing.com and finacial portals like Moneycontrol, Bloomberg etc and some of the virtual simulator platforms in selected exchanges offer delayed datafeeds

Why Exchange charges fees on datafeeds?

Exchanges charge fees for access to their data feeds because they incur costs in collecting, processing, and distributing the data. These costs may include the costs of maintaining and updating the systems and infrastructure needed to collect and disseminate the data, as well as the labor costs associated with managing the data feed.

In addition, exchanges may see the sale of data feeds as a source of revenue. By charging fees for access to their data feeds, exchanges can generate income that can be used to cover their costs and potentially earn a profit.

Exchanges may also charge different fees for different types of data feeds, based on the level of detail and granularity of the data being provided. For example, a tick-by-tick data feed, which includes every single trade or price change that occurs on the exchange, may be more expensive than a Level 1 data feed, which only includes the current bid and ask prices and the volume of trades being executed.

Overall, the fees charged by exchanges for access to their data feeds are meant to cover the costs of providing the data and potentially generate revenue for the exchange.

Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in and Co-Creator of Algomojo (Algorithmic Trading Platform for DIY Traders)

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