Market data is a record of what happens in a market.
Market data is real-time and historical information about trading activity, including prices, orders, and volumes.
Market data comes in several forms, including tick-level records, volume, order book data, derivatives data, and onchain data.
Tick-level data is the event-by-event record of all exchange activity. This can include order placements, cancellations, trades, and updates to price or size. It is the most detailed type of data and is often used in advanced trading strategies.
Order book data, also known as Level 2 data, captures bids and offers across the price spectrum in real time. While top-of-book data shows the best bid and offer, full-depth data provides a more detailed snapshot of supply and demand.
Market data is used to trade, research markets, manage risk, and monitor trading activity.
Algorithmic trading and market making place the highest demands on market data. A market maker quoting across dozens of venues at once needs accurate, low-latency order book feeds to manage inventory and reduce adverse selection. In that setting, data quality and speed are operational requirements.
Quantitative research and backtesting rely on clean historical data to build and test trading strategies. The output is only as good as the input. A strategy built on daily candles can look very different in production when it meets live tick-level conditions.
Compliance and trade surveillance teams use market data to look for unusual trading patterns. Robust data sets mean compliance teams can identify patterns like wash trading, spoofing, or layering that may indicate market manipulation. Regulators use this data for oversight.
This has an important implication. Treating the price on a single venue as the market price can be misleading. Professional firms consume data from multiple venues at once so they can build a consolidated view of where an asset is actually trading.
Traders often mistakenly assume that an aggregated price feed is the same thing as full market data. It is important to properly distinguish the two.
A price feed, such as one published by an onchain oracle network, gives a consolidated reference price derived from multiple sources. That is useful for DeFi applications that need an external pricing input, but it is not market data in the professional trading sense. True market data is granular, venue-specific, and timestamped at the individual event level. Confusing the two can lead to weak backtests, poorly calibrated execution models, and risk frameworks built on data that lacks necessary detail.
True market data is granular, venue-specific, and timestamped at the individual event level. Confusing the two can lead to weak backtests, poorly calibrated execution models, and risk frameworks built on data that lacks necessary detail.
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