Exchanges, Opra to Ditch FAST Protocol

US exchanges and options data consolidator the Options Price Reporting Authority are to phase out their use of the bandwidth-reducing FIX/FAST Protocol as a data compression standard this year, citing increased availability of high-bandwidth networks since the standard’s launch, though sources say the industry is increasingly concerned about potential exposure to a patent infringement lawsuit brought against exchanges and data vendors.

Initially, in a notice distributed earlier this month to customers, CME Group—one of the early adopters of FAST—said that “the Opra-connected exchanges are eliminating FIX/FAST entirely by the end of this year,” and that CME will remove certain operators from channels of its market data feeds between May and November, and replace these with new templates in the short term, and replacement feeds that it will announce when ready.

According to the notice, “given the increased availability of bandwidth as well as high-speed connections such as co-location, compression has become less critical.” However, CME officials last week confirmed to Inside Market Data that the exchange is removing the components that might be affected by the litigation, to help clients mitigate their exposure to the patents that are the subject of the lawsuit, and is evaluating alternative binary data formats.

"These patents are being challenged in court and at the US Patent and Trademark Office, and some have been rejected. However, Realtime Data continues to demand license fees and sue companies that receive FIX/FAST market data," says Katherine Patrick, director of partner exchange and client technology management in CME's global account management division. "Thus, in addition to other efforts that CME Group is undertaking to address this situation,  and in abundance of caution, the two operators accused by Realtime Data and two others are being removed."

One source familiar with the situation questions the exchange’s assertion that compression is no longer important, saying, “A lot of people are still trying to deal with bandwidth issues, so if CME says it has resolved them, that is not necessarily the view of the rest of the industry.”

"Trading firms are choosing to adopt the exchanges’ direct binary format feeds, where available, as a successor to ‘older’ exchange feeds, thus bypassing the FIX/FAST format.” - Emmanuel Carjat, TMX Atrium

However, Emmanuel Carjat, managing director of network provider TMX Atrium, echoes CME’s position that the need for compression has abated as network capacity has grown. “The use of FIX/FAST Protocol conversion is a trade-off between latency imposed and bandwidth savings. Participants must choose between the performance impact of using FIX/FAST versus running data raw and making their decisions based on that data,” Carjat says. “In addition, an increasing number of exchanges are putting out binary feeds designed for direct machine input … [with] the advantage of smaller packet size and reduced jitter, so trading firms are choosing to adopt the exchanges’ direct binary format feeds, where available, as a successor to ‘older’ exchange feeds, thus bypassing the FIX/FAST format.”

In addition, the Securities Industry Automation Corp., which administers the equities Consolidated Tape Association and Opra’s feed of US options quote and trade data, recently informed Opra data recipients that it has completed design of a new binary data format that will reduce bandwidth while also reducing latency, and will migrate to this over the next six months, phasing out FAST on Nov. 5. Another source familiar with the situation says Opra had received requests to speed up its feed and remove the latency impact of compressing and de-compressing data.

Officials at FIX Protocol Limited, the standards body responsible for maintaining the FAST Protocol, decline to comment. However, Daniel May, director at Chicago-based low-latency feed handler and ticker plant vendor SpryWare—the co-developer of FAST, along with Pantor Engineering, which also declines to comment—says there is “no doubt” that the exchanges’ moves are in direct response to the patent infringement litigation by IXO/Realtime Data, a company based in New York and Texas that holds numerous patents around data compression.

Patent ‘Extortion’
“CME is taking the approach to remove the specific encoding operators that are the target of the FAST patent infringement lawsuit… while others like Opra and NYSE are dumping the protocol altogether,” May says. “This highlights the completely dysfunctional state of the US patent system, one that allows ‘patent trolls’ to extort legitimate businesses…. [Meanwhile] firms are reverting back to code and algorithms that are decades old, and using archaic methods solely because they pre-date thousands of dormant patents that ‘may’ one day become a liability.”

IXO/Realtime Data’s attorneys were unavailable for comment at press time.