London, 27 January 2021

BMLL and WBR Insights today published new buy side research exploring how market participants use Level 3 data and analytics in their daily trading decisions to uncover predictive signals for algorithmic performance.

The Whitepaper “Buy-side usage of Level 3 data analytics for algorithmic performance” found that high quality data has become a commonly utilized commodity by most market participants who manage their AUM quantitatively; 74% of respondents said they use Level 3 data in their research program to improve alpha generation and mitigate risk.

It is clear that data and analytics play an increasingly important role in the workflows of all capital market participants. However, utilising vast data sets for alpha generation is both labor and capital intensive. Firms lack the in-house resources to manipulate the data and face prohibitive cost when looking to acquire or analyze it.

As a result, the buy-side community is responding to the availability of powerful new data sets by investing heavily in their capabilities and partnerships to drive their never-ending quest for performance and predictability.

Our research found that:

  • 64% of respondents said that at least 50% of their investment in new data and analytics capabilities will be from buying-in these capabilities
  • 42% of respondents use Level 3 data for strategy backtesting, e.g. feature generation, alpha generation and model validation
  • And of the respondents not using Level 3 data in their research programs – nearly 75% said the main reason was its inaccessibility
  • 41% of respondents said that they will increase their budget allocations significantly for third-party data as a key element of their quantitative research

Paul Humprey, CEO of BMLL, said:
“It should come as no surprise that many investment firms are looking to partner with third parties to outsource data and analytics generation. Companies that understand the benefit of partnering with a firm that can provide such data and analytics will be in the best place to leverage a more efficient quantitative trading division and generate more repeatable and scalable alpha.”

Dr. Elliot Banks, CPO BMLL, added: “The fact that 74% of respondents are using Level 3 data is a clear indication of the value of this data for research purposes. Level 3 is the only data set that gives you enough information to reliably predict future market states using statistical techniques. Given where the market is going, it is unsurprising that so many firms are starting to use this level of data.”

The next 12-18 months will be critical for all firms looking to embrace data and analytics to help drive increased risk-adjusted returns, as they face increased pressures and competition from cost-effective alternatives. It is clear that for this to happen only the Cloud can offer the critical storage and compute scalability to secure and speed up the analytical process and diversify the data stream. Over 80% of respondents said they were likely to or are already embracing Cloud for their data and analytics generation and processing over the next 12-18 months.

William L’Heveder, COO, concluded: “Having access to clean harmonized data is critical and when combined with a sophisticated analytics platform can not only enhance existing data infrastructures, it can offer firms a cost-effective alternative to building a comprehensive and costly data science capability in house.”

BMLL supports clients across every aspect of their quantitative market research and analysis with access to a harmonized Level 3 data warehouse, a data science platform, analytics feeds, and a suite of integrated visualization tools.

BMLL’s data and analytics are used by leading institutions across the capital markets ecosystem for alpha generation, to understand how markets behave, back-test trading strategies, and to make more informed trading decisions. BMLL’s Data Feeds are pre-computed from the most granular, Level 3 order book data and provide market participants with the actionable insight needed to outperform the competition. The BMLL Data Feeds cover venue analytics, trading costs, alternative pricing, pricing analytics and trading analytics.

The research in Q4 2020 surveyed 100 Heads of Data, Chief Data Officers and Data Scientists at buy-side firms with $10-50bn in AUM in EMEA and North America.

This full research paper is available here.


Media contacts:

Sybille Mueller - Streets Consulting

| +​44 (0)20 7959 2235

Editors Notes

About the Survey

In Q4 of 2020, WBR Insights surveyed 100 Heads of Data, Chief Data Officers, Data Scientists at buy-side firms in the EMEA, and North American regions to find out how capital markets participants use predictive data and analytics in their daily trading decisions.

The report aims to gain a greater understanding of how hedge funds and asset managers are challenged by back-testing alternative data and their ability to derive meaningful insights from new alternative data, such as Level 3 data, which in the past five years has only become widely available.

About BMLL Technologies

BMLL Technologies is a financial data engineering and data and analytics company serving the world’s most sophisticated market participants. BMLL specialises in providing clients access to granular order book data and advanced analytical power at unparalleled speed and scale. Born out of the machine learning labs in the Engineering Department at Cambridge University, the platform allows financial services firms to apply complex statistical techniques to niche big-data sets and perform machine learning on Level 3 order book data with applications such as market impact, pre & post trade analytics, order book simulation and compliance. The offering means clients no longer need to buy and curate the data from global exchanges, instead are offered cost effective access to the full order book with a long history for back-testing. For more information, please visit our website, or visit our Twitter @bmlltech.