- MEMX is a members-owned stock exchange that went live in May 2020.
- The one-year-old exchange is putting its market data on the blockchain-based Pyth Network for free.
- The move will bring MEMX data to new users and is a key step in spurring competition in the space.
The Members Exchange, an upstart exchange backed by the likes of JPMorgan, Goldman Sachs, and Citadel Securities, is putting its market data on a blockchain network in a nod towards the potential future of how Wall Street accesses its information.
The equities exchange is offering free access to its real-time pricing data on the Pyth Network, a distributor of financial market-data that sits on the Solana blockchain.
The way Wall Street consumes its data has evolved as data providers and financial institutions embrace new technologies.
The public cloud is one such driver of change, with data providers moving to the technology as banks, hedge funds, and asset managers demand more information at a faster clip.
Nasdaq released its cloud-based data analytics hub in September. Snowflake unveiled a financial-services cloud to help clients unify disparate datasets, while Bloomberg launched its BQuant tool for advanced analytics last week.
MEMX’s partnership with Pyth isn’t just about leveraging new tech to distribute data. It’s also about increasing access to market data to a wider swath of users.
Market data — which includes everything from the bid and ask price of a particular stock to how much, or little, it is being traded — is the lifeblood of any trading organization. The information is key in helping traders, and their algorithms, make decisions in the market.
But access to the data doesn’t come cheap. Global spending on financial market data and analysis totaled $33.2 billion in 2020, a 5.9% year-over-year increase, according to an April report from consultancy Burton-Taylor.
But despite how crucial market data is to participants, the industry is largely dominated by a handful of players like Bloomberg and Refinitiv. The space is also becoming increasingly profitable for exchange groups, which sell data feeds based on the trading activity that occurs on their venues.
Growth in so-called information-services businesses at trading venues was a key focus point of many exchanges in 2020, according to a May report from Burton-Taylor.
MEMX, which doesn’t currently sell its market data, has taken a different approach, leading it to partner with Pyth.
The members-owned venue has always been about “bringing competition and participating in projects that help market participants and challenge the status quo, and over time all investors will see benefit from all the exchanges,” MEMX CEO Jonathan Kellner told Insider.
MEMX was formed to take on what some participants felt was a consolidation of power in the US equities market. Founded in 2019, it has received backing from some of Wall Street’s biggest players, including JPMorgan, Bank of America, and Goldman Sachs. The upstart currently has 64 members.
MEMX has become one of the fastest-growing trading venues, increasing its market share by 21% month-over-month. It currently handles roughly 4.5% of US equities trading volume. A record $20.5 billion was traded on the exchange in one day in September, according to the firm’s most recent data.
Opening up data to new users
MEMX won’t be the first firm to publish equities data on Pyth. Many of its members, including trading giants Jump Trading, Hudson River Trading, Virtu Financial, Jane Street, and Susquehanna International Group already publish their pricing data on the network.
IEX Cloud, which is owned by exchange IEX Group, also contributes its market data to Pyth.
“When you see that many members get behind a project, it doesn’t mean it’s going to be successful, but it’s probably an area that is worth keeping an eye on,” Kellner added.
Pyth is part of decentralized finance, an up-and-coming movement aiming to make the financial markets more accessible for less sophisticated participants via blockchain technology.
DeFi allows consumers to reach financial products without needing to go through middle-men, such as banks or brokerages. That includes the issuing of smart contracts, a self-executing contract where the buyer and sellers’ agreement terms are written into lines of code.
Access to timely, accurate, and consistent data has been one limitation of many DeFi systems. The Pyth network aims solve that problem by bringing such data from off-chain venues — such as traditional exchanges — to on-chain, Kellner said.
To be sure, the process isn’t perfect. In September, Solana, the blockchain underpinning Pyth, had a 17-hour outage due to a ‘resource exhaustion.’
Pyth, for its part, has at least 25 firms publishing data to its network. And while it doesn’t currently stand to compete with traditional data feeds, it is working to build something that is DeFi-friendly, free, and open for anyone interested in the data, according to a Pyth spokesperson.