Market Data API Buying Guide

Navigating the sea of market data APIs can seem daunting, but fear not! This guide will cut through the noise, focusing on what truly matters for algorithmic traders and quant analysts.

We’ll dive into key factors—speed, data scope, reliability, cost—and equip you with the knowledge to select an API that fits your strategies and data needs.

I used the following criteria when I ranked the best market data APIs.

Let’s transform data into your trading advantage. Ready? Let’s get started.

Evaluating a Market Data API

You should consider various criteria before buying a Market Data API. Based on my experience, I have summarized some of them below:

Market Coverage

Market coverage is the essential criterion when selecting a Market Data API.  You don’t want to spend money on an API that doesn’t return the needed data.

You can evaluate an API for its market coverage based on three criteria:

1. National and international markets.
2. Market instruments, e.g., stocks, forex, crypto, futures, options, commodities, etc.
3. The time frame of the data, e.g., real-time, daily, aggregates, daily, historical, tick data.

The easiest way to get market coverage information of an API is via their official documentation. You will almost certainly find information about the market coverage of the API along with the data time frame.

You can always contact support if you cannot find some information in the documentation. Please beware of the second option; they will flood you with marketing emails once you contact them.

Accuracy

You will likely find several Market Data APIs providing the data you need. But a question you must ask yourself is how accurate this data is. Inaccurate or outdated data can lead to erroneous decisions and losses.

Measuring the accuracy of an API can be tricky. You will find different APIs returning varying values for the exact data requests. So which data is the most accurate? There are a few ways to help you get the answer to this question.

1. Find if an API provides National Best Bid and Offer (NBBO) complaint data, which includes the highest bid and lowest ask prices for security sourced from all exchanges. NBBO data is calculated and disseminated by Security Information Processors (SIP). You can get this information from the API’s website or contact support, which, in some cases, can also give you other characteristics about the accuracy of their API.
2. Retrieve data from various APIs you want to compare and see the divergence of values from its mean. APIs with higher accuracy are likely to have less deviation from the mean values returned by all the APIs. You can use trial versions of APIs to retrieve the data for accuracy tests.
3. Look for user reviews on social media i.e., Reddit. This might look obvious, but getting feedback from users having hands-on experience with an API can get you the most honest opinion about the accuracy of an API.

Latency

Latency refers to the time between requesting an API for some data and receiving a response.

Latency is likely to be the most critical factor for algo traders and quantitative analysts who rely on fast and real-time data to execute their trading strategies. Low latency may lead to delayed and erroneous decisions, which may incur losses.

Like accuracy, most API providers provide latency information with the API documentation. In any case, you should run your test cases using trial versions to measure the latency rates of various APIs. And as always, consult social media reviews, and contact support if you are still looking for answers related to the latency of an API.

Scalability

Scalability requirements are subjective and depend mainly upon the volume of data you want to retrieve from an API. If you plan to execute a large number of API requests in parallel, you might need an API that scales well to high demand.

Almost all APIs define rate limits and request quotas restricting a certain number of requests within a time frame. Some APIs also set a limit on parallel requests. Luckily, this is one piece of information you can always find in the API’s documentation.

Additionally, run your own tests to see how well an API scales. However, the test run through the trial version may not reflect the scalability, as trial versions typically have lower rate limits than paid subscriptions.

Usability

The usability of a market data API refers to how easy it is to use and access the data provided by the API. Though usability is subject to user expertise, there are some standard criteria that an API must fulfill.

Consider the following points while comparing APIs for usability.

1. The API documentation should be user-friendly and comprehensive, enabling users to replicate the provided steps easily.
2. It should support the languages that you are most proficient in and should provide an official plugin in those languages.
3. It should return the data in your desired format. Processing API responses can get cumbersome, and retrieving responses by default in your preferred format is always handy.
4. It should provide default integrations with other libraries and software.

The official documentation of most APIs answers the above question. However, it is crucial to consider your expertise while selecting an API. As a beginner programmer, you might find an API challenging to use compared to an experienced developer.

Price

You will likely find several APIs that fulfill all your criteria. But you need to select the one that fits your budget. The next step is the price comparison among the APIs, which can be tricky for various reasons.

Most APIs provide multiple subscription plans that depend on several factors, such as data types, rate limits, request quotas, etc. Secondly, subscription plans may charge flat fees, tiered pricing, and usage-based pricing.

Some APIs even offer custom subscription plans. All this information can be overwhelming. In addition, some APIs provide trial plans, but they often need to reflect the true potential of an API owing to limited features.

If you are serious about purchasing an API plan, carefully review its price plans. Your first source of the price information of an API is their official website. The API websites typically contain detailed information on all subscription plans and how they compare.

However, I cannot stress enough the importance of contacting support to inquire about detailed information regarding the price plan you are interested in.

APIs often charge hidden fees not mentioned in their subscription that you should know before deciding on the API you want to buy.

It’s also useful to gauge how quickly support will help in the event of an issue.

Market Data API Gotchas

There are some Market Data API Gotchas that you should try to avoid:

1. Vendor Lock-in: You should not be too dependent on one market data API, making it difficult to migrate to another API. Thoroughly research if switching to another API, if needed will be easy.
2. Data Reliability: If the API relies on a third-party data vendor, research the vendor’s reputation for data accuracy, timeliness, and reliability. Unreliable data vendors can negatively impact your trading decisions.
3. Service Reliability: Research the API provider’s reputation for uptime, system stability, and customer support. Downtimes or unreliable service can disrupt trading activities.
4. Compliance and Regulations: Be aware of any regulatory requirements for accessing and using market data. Ensure that the API and your usage comply with applicable regulations.
5. API Versioning and Updates: Understand how the API handles versioning and updates. Changes to the API’s structure or endpoints can break your existing integrations, so be prepared to adapt to new versions when necessary.

The Bottom Line

In conclusion, our comprehensive Market Data API Buying Guide has empowered you with the knowledge and criteria to evaluate market data APIs for trading data. You can select a market data API that meets your requirements by considering factors such as accuracy, market coverage, usability, scalability, latency, and price.

Furthermore, I have highlighted potential gotchas to help you steer clear of common pitfalls. Armed with this guide, you can confidently select a market data API that meets your needs, ensuring accurate and reliable data for your trading activities.