Nanex Gets $700k Whistleblower Award from SEC
So essentially the exchanges offer multiple data feeds.  These feeds are differentiated by a couple of points.<p>1) How much market data they give out.  Typically this is broken into 3 levels:<p><pre><code>  - Level 1, Just the top of book quote, this is the best bid and offer and their corresponding number of shares at this price level.

  - Level 2 Depth of market at each price level, same as above but you can see all liquidity offered.

  - Level 3 same as Level 2 but you can see each individual order that contributes to each price level
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This differentiation is generally considered to be a good thing as most people including most hedge funds can get by with even Level 1 quotes.<p>The other way they differentiate is the speed at which you get updates.<p>Have a look here to see what just the Nasdaq offers.  <a href="http:&#x2F;&#x2F;www.nasdaqtrader.com&#x2F;Trader.aspx?id=FeedMIPS" rel="nofollow">http:&#x2F;&#x2F;www.nasdaqtrader.com&#x2F;Trader.aspx?id=FeedMIPS</a><p>You can spend anywhere from $500&#x2F;month to $75,000&#x2F;month to receive market data from just the Nasdaq, one of 50 trading venues in the US.<p>As you can imagine the difference is speed.  The slower methods will use the text based FIX protocol and the fastest methods give you a feed and an FPGA to parse the feed with.<p>It&#x27;s this later feed that is getting the exchanges into trouble as these feeds notify the user of trades before the SIP can be updated which lets firms have a 300 millisecond second peek at the market before everyone else does.<p>Couple these faster feeds with many dark pools not reporting trades in a timely manner and new order types that allow firms to sweep liquidity at one exchange only( ie not rout-able orders) and you get a situation where latency arb can thrive.