Market Data for a Digital Financial Future

By Ambre Soubiran, CEO, Kaiko

Ambre Soubiran, CEO, Kaiko

Blockchain technology, by enabling the issuance and trading of tokenized financial assets in a scalable, permissioned, and compliant manner, is deeply transforming the way finance works and the way ownership of assets is represented, paving the way for a large-scale reshape of traditional capital markets.

The vast diversity of digital investment products opens the door for new market participants, and with it, the need for data transparency in order to protect investors and promote informed decision making. The importance of transparent market data is not to be underestimated, particularly in the cryptoeconomy — where misinformation and asymmetries abound. The explosive growth of digital assets in the past few years has led to the creation of hundreds of new trading platforms for their exchange. Thousands of assets trading on hundreds of exchanges generate millions of market data points a day, rendering market comprehension a difficult--if not impossible-- a task for new investors.

Kaiko was founded in 2014 to relieve the data burden created by decentralized and open financial markets. We realized that there wasn’t yet a way to access normalized and granular market data, an absolute necessity for informed decision making in traditional financial markets. Thus, we set out to build the infrastructure to connect with dozens of independent and disparate digital assets exchanges, in hopes of increasing overall transparency in the cryptoeconomy. Five years later, we are integrated with over 50 exchanges covering 7,500+ trading currency pairs, with new markets added every day to our collection pipeline.

Market data shows the depth and structure of the market (order book data) as well as the prices at which transactions are executed (trade data). This data is scattered across all trading venues and although publicly accessible, is technically challenging, time-consuming and costly to access. New markets and financial instruments drive demand, and better technology brings increased flexibility. This means that market data is increasingly becoming a necessity for informed decision making in the constantly evolving digital economy.

The traditional financial market data industry currently represents a $28bn+ market (Source: Report on Global Spend on Financial Market Data). Larger market data providers such as Bloomberg and Thomson Reuters tapped into the thirst for financial data early-on, and have reaped the rewards from traditional market participants. In recent years, demand from institutional investors for blockchain data is increasing, with 40% of investors planning to shift hedge fund assets to alternative asset classes (Source: Ernst & Young – Global Hedge Fund and Investor Survey on Blockchain and AI). Thus, digital assets market data, with a 4% share of financial market data by 2022, would represent a $1bn+ industry.

At Kaiko, we take inspiration from traditional financial data providers in designing robust and highly available infrastructure for the digital economy, adjusting our tools for the added complexities that cryptocurrency markets bring. We solve the problem of data collection, normalization, storage, and delivery, allowing investors to completely outsource the costs of integrating with dozens of exchanges themselves. This work has paid off, evidenced by the influx in institutional interest in digital assets market data.

Ultimately, data providers guard the entrance to the digital economy. Institutional investors will never enter a new market before vigorously studying price trends and trading patterns. Thus, we believe we have well-positioned ourselves as the point of the first contact for institutional investors hoping to learn more about digital markets before wading in.

Institutional interest guides our development approach and has led to our investment in both high-availability and low-latency infrastructure, to match the needs of investors. For example, some clients require low-latency data (for live decision making) while others require large historical data sets (for research purposes). Others only need very specific pieces of data across many exchanges and timeframes (for backtesting trading strategies). We have factored these needs into the development of three versatile data delivery channels: a livestream websocket, REST API, and cloud-based Data Feed.

Our livestream websocket delivers trade data and order books in a low-latency feed designed for sophisticated market participants who need live data. Our REST API allows clients to query our extensive datasets through over 10 real-time and historical data endpoints. Finally, our Data Feed is a cloud-based flat file data delivery system, best for the seamless transfer of large historical datasets. All three delivery channels are designed to fulfill a wide-range of client data needs. Whether a client requires live or historical data, flat-files or query-based, we have adapted our systems accordingly.

In the near future, blockchain technology will effectively disrupt the way the traditional capital market industry operates and the way we represent ownership of traditional assets- we can expect a coming wave of tokenization of existing assets (real estate, commodities, mid-cap equity, debt, etc.), as already being explored by several high-profile companies.

We have observed the power of independent, reliable and accountable market data to empower decision-makers and level information asymmetries. We will continue to expand our data offerings in the new digital economy because we believe that transparent, granular, and normalized data is an essential requirement for the maturation of this industry. Ultimately, Kaiko aims to become the premier source for unaltered and trustworthy digital assets market data.

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