How to choose a data provider

Exchanges

Exchanges are the platforms that facilitate trading between buyers and sellers of securities. Hundreds of exchanges help to exchange stocks, futures, options, cryptocurrencies, and other financial assets. Exchanges are the original, raw source of the information that data vendors might further resell.

Exchanges can have open data policies (such as IEX, Binance, and Coinbase) or close data policies (such as NYSE, NASDAQ, and NSE). A closed data policy means that the data has to be purchased or licensed without free public access.

Exchanges, in the majority, were created decades ago and are very slow to modernize due to a huge legacy code and protocols. Therefore, they lack flexibility and ease of integration. Lastly, the costs of receiving data via exchanges are typically higher than via vendors.

Advantages:

• Reliability and the accuracy of the data that customers receive. For HFT traders, exchanges offer direct connectivity, meaning that the company's servers can be co-located in the same data center as the exchange’s.
• Some exchanges, such as the National Stock Exchange of India, give access to the data only to the direct customers, without any intermediaries.

Disadvantages:

• Old school technology.
• Lack of data diversity.
• High costs.

Data vendors

Data vendors are entities that collect, process, verify, and distribute data. Their primary role is to ensure that the data is accurate, reliable, and relevant to their users’ needs. Typically, data vendors are industry-specific, focusing on a specific category: finance, healthcare, marketing, etc.

Advantages of data vendors:

• Data coverage, meaning that customers will be able to get a diverse set of information.
• Many vendors also process data and create new methods on top of the raw data to meet demand from the customers.
• Data providers are more keen to provide a customized tailored solution for specific customers, such as a custom-made dataset, specific connection method, and more.
• Customer support tends to be better with a faster response time, detailed help about your use case, and assistance with the correct licensing option.
• Cost can also be an advantage since economies of scale kick in for a wide selection of data.

Disadvantages of data vendors:

• Unclear data sources when providers try to minimize their costs and therefore receive from unverified sources or shady methods.
• Potentially, prices can be high since data providers are not the data owners and therefore might need to add their own margin to the original cost.

Data marketplaces

Data marketplaces are a relatively new category of companies that developed in recent years. These companies tend to bring different data vendors under one roof and offer an easier and more comprehensive choice for the users. Most companies differentiate themselves with a distinctive approach and focus: alternative data, facilitating data transactions, unanimous API, etc.

Advantages:

• The main advantage is the uniform workflow for product and development teams when aggregating multiple data sources.
• Other advantages are similar to data vendors’ — good support and lower costs.

Disadvantages:

• Limited with the main one being unverified or unreliable sources, since data marketplaces might not be able to verify each of their data offerings and display it straight to the users. This might be a big implication for a production environment that faces final customers.

Finazon

We at Finazon are building a distinctive platform that acts both as the data vendor and data marketplace. We spend lots of energy on creating highly reliable proprietary datasets and open our platform to publishers that meet the quality standards. This gives an unparalleled advantage to the users of a greater selection of data, unique API, and lower costs.

Advantages:

• Unified API.
• Customizable datasets.
• Other advantages are similar to data vendors’ — good support and lower costs.

Disadvantages:

• No coverage of data beyond the financial industry… yet.

Which should you choose?

It all ultimately depends on your organization’s specific needs and priorities. The choice may depend on data quality, costs, data retrieval approach, and legal requirements.

If your business requires highly specialized and accurate data, an exchange may be the better choice despite the higher cost. This option is particularly suitable for cases where data quality and specificity are paramount.

Conversely, if your organization values access to a broad range of data, cost efficiency, and flexibility, a data vendor or a marketplace might be more appropriate. Data exchanges are ideal for businesses that need to integrate diverse datasets for comprehensive analysis or those that operate within tight budget constraints.

Here is a side-by-side comparison:

Ultimately, the decision should be guided by a thorough assessment of your data needs, budget, and the specific applications for which the data will be used. You’re always welcome to try the Finazon’s datasets catalog and integrate it to your workflow in minutes.