Interactive Brokers Creates Vendor Arm to Consolidate Data Ops

Greenwich, Conn.-based online broker Interactive Brokers has set up a new data vendor subsidiary, based in Switzerland, to consolidate the firm’s data-acquisition operations under a single entity. It also aims to provide lower data costs to its brokerage clients.

The broker first conceived the idea for the vendor arm, dubbed Global Financial Information Services (GFIS), three years ago, and formally set the wheels in motion at the start of 2019. Last July, they formed a separate entity, and IB plans to go live with the subsidiary at the start of February.

GFIS provides data from more than 125 trading venues in 31 countries, plus around 100 sources of free and fee-liable news and research.

The aim, says Yochai Korn, managing director of GFIS and global head of market data and research at Interactive Brokers, is to provide a quality product to clients at the lowest possible price. Within that, there were two main drivers for creating GFIS as a standalone business.

First, there were internal factors: As Interactive Brokers grew over the past 40 years, it accumulated a wealth of data contracts and licenses under different entity names, which was not the most efficient way to manage market data consumption. The new structure represents a “complete revamping of all data contracts into a single entity name,” and allows the broker to offer clients “a more flexible product offering,” Korn says.

Second were external industry factors that made the broker realize that it required more control over its data assets. “We identified that we needed a global response to the changes that were happening across the industry—including automation, privacy protection, data cost compared to value, and flexibility, recognizing the industry is not static—and we could sit back and watch or take the lead,” Korn says.

“After the dust settles, GFIS will have the ability to package product for end-user clients in a manner that is not part of the Interactive Brokers practice today. For example, to create a futures offering that is cross-geographic regions, or a bundled depth-of-market service that incorporates multiple diverse trading platforms, or to present data by instrument, rather than just by platform,” he says.

The independence from the brokerage business also gives the vendor arm greater freedom and control over its data. In the past, Interactive Brokers would add datasets based on whether they would result in more trading. Now, so long as demand is sufficient to cover the costs associated with sourcing a new dataset, GFIS can bring on any data that will broaden its offering.

“We are investigating how we can best communicate with users to gauge demand. We also have had a significant interaction with data sources to assist them in getting their new products in front of a large, sophisticated audience,” Korn says.

The move has elicited a mixed—but mostly positive—response from data sources, he says. Some allowed Interactive Brokers to simply novate the agreement to GFIS, while others agreed and signed new contracts. “Other than the logistical challenge of opening and examining all agreements, we are finding it to be beneficial,” he adds.

Specifically, having all data agreements under control of a new, single entity generates “greater accountability and better reconciliation of inventory to invoices. If we know what we are paying for and how it is designated in the agreements, we can coordinate with suppliers to get the best result,” Korn says. “It gives us a clean slate from which to build. Rather than spending time and effort to patch what was in place, we have developed a uniform organized database of agreements. This allows us to speak to our counterparties in a standard language, and we anticipate contributing to improvements to the industry that recognize ‘unique is not better’ when referencing definitions of terms and conditions.”

This new uniform database of licenses now contains all the novated and newly agreed contracts. “In this process, we were able to verify all agreements as complete to current conditions, and all exhibits and amendments are in a single database. Prior to this, the different Interactive Brokers affiliates had differing practices on contract storage and maintenance,” Korn says.

Customers will be able to access data from GFIS via Interactive Brokers’ IB Trader Workstation, and via other third-party displays, where compliant.

Located in Cham, about 17 miles south of Zurich, and a short drive around the north shore of Lake Zug from Interactive Brokers’ European headquarters, GFIS will initially be staffed by a mix of dedicated personnel and others with shared duties at Interactive Brokers. Relationship management functions will remain within Interactive Brokers, while administrative functions will have a reporting structure into GFIS. Besides some shared responsibility with people currently in data roles at the parent brokerage, Korn says GFIS currently has around eight staff, and is recruiting in Zug, Greenwich, Conn., and Mumbai.

Though focused primarily on serving Interactive Brokers, Korn expects to also provide data to other brokers and vendors, though that’s subject to approvals from data sources. “We are not envisioning ourselves as a ‘full service’ vendor, but rather a conduit between parties…although we envision other brokers seeking our services as a solution to their data needs,” he says, adding that there are no plans to create proprietary data products based on Interactive Brokers’ brokerage operations. “That is not something envisaged in the near future as we are not currently creating commercial products; just superior access for others.”