Guide to market data licensing
Market data licensing is complicated, there's no way around it. Every subscriber is different, which means there's no one-size-fits all template to understanding your licensing needs.
The good news is, while every situation will be different, understanding some key aspects market data licensing will help make the process much smoother, and hopefully faster.
We created this guide to help guide anyone through the market data licensing process. Whether you're already licensed with a venue or just begining the process, this guide will help answer your questions and give you additional context for the overall process. We hope you find this helpful!
You can read the guide in full, or use the table of contents below to navigate to the sections most relevant to you.
- Introduction to market data licensing
- Understanding license fees
- Determining subscriber status
If you're new to market data licensing, this is a great place to start. In this section, we'll cover some general topics which will give you a good foundation of understanding before diving into some of the more complicated aspects of the licensing process. Here's what's included in part 1:
- Do I need a market data license?
- Overview of the market data licensing process
- Introduction to market data licence fees
You need a license to access real-time (live, intraday) market data if you're a professional user or if you're distributing data externally within 24 hours of receipt.
You don't need a license to access historical (T+1) data. These rules apply regardless of which data vendor you choose.
This is possible for US equities data through Databento's unique DBEQ offering. This dataset is a bundle of US equities proprietary feeds from NYSE Chicago, NYSE National, IEX, and MIAX Pearl Equities, which are free to license for distribution, display, and non-display applications and is ideal for web apps, brokerages, systematic trading, and cloud-based environments.
Every venue has a different cutoff between intraday and historical data (aka how much time passes before fees are usually lowered). Some define "historical" as 24 hours into the past, while others define "historical" as right after the market session ends. Databento users don't need a license to access historical data, which we define as 24 hours into the past. Other vendors may vary, as the license requirement varies depending on their product and definition of historical.
Note that there are some situations where you must have a license for historical data:
- You plan to redistribute the data. See definitions and learn more here.
- You're buying exotic OTC data not widely available to trading participants.
- You're buying raw PCAPs from ICE.
Yes, exchanges require a license for any intraday or delayed data. However, some exchanges charge lower license fees for delayed data. Historical data usually doesn't require a license, but there are some common exceptions which we've listed above.
"Bring-your-own-data" or BYOD, refers to users bringing their own data (usually via API) to a third-party trading platform, analytics tool, or other product. In short, we don't recommend this due to:
- Licensing complications: Users without an existing license may be required to obtain one from the exchange.
- Engineering effort: It's tough to implement multiple APIs from different data vendors. We recommend having a single API key when possible.
- User onboarding friction: It can take months before a user obtains their license, thus delaying their onboarding experience.
- Buying data directly from a vendor is more expensive upfront, as you'll have to pay for the license to re-distribute data to your users, but it leads to faster onboarding and a seamless user experience.
- You can choose to pass-through these fees to your users.
- While it's more accounting work, this allows you to track your user's data usage over time.
It depends on the vendor. At Databento, we've streamlined licensing into a 3-step process:
- Determine your subscriber status
- Sign your attestation and any additional documents required by the venue
- Access live data
If you're a current Databento user, you can check out our streamlined licensing process here.
If your subscriber status is professional or you're redistributing data, we'll introduce you to the exchange (e.g. NASDAQ, CME, OPRA) via email so you can obtain the formal license or ILA. This is the longest step of the process and cannot be automated, as the exchange must speak with you to determine your status and corresponding fees. This can take months to complete, so we recommend getting started 3-6 months in advance.
In general, you'll have to complete the three steps mentioned earlier (determine your subscriber status, sign your license agreement, access live data). This can be a very lengthy process depending on which exchange(s) and data provider(s) you choose. We recommend starting the licensing process three to six months in advance, given the multiple parties involved.
If you're a non-professional user who isn't re-distributing data, you can sign the attestation and get access to real-time data instantly on Databento's website. In this case, Databento would serve as a vendor of record, e.g., we report your entitlements: you don't have reporting requirements, don't need a license agreement, and don't need to have a direct relationship with the exchange.
If you're a professional user or re-distributing data, we'll introduce you via email to the exchange to obtain the formal license or ILA. We recommend getting started three to six months in advance, given the multiple parties involved.
1.3 Do license fees vary by vendor and exchange?
It depends on the exchange/venue. Some exchanges require you to pay them directly in addition to your data vendor, while others allow you to pay the data vendor, and the data vendor will pass the fees up to the exchange.
Yes. Every exchange, venue, and data vendor has a different fee structure. These fees can be broken down into the following:
- Monthly exchange license fee. Fees range from $32 to $20k+ per month per exchange and are vendor-agnostic (required regardless of which vendor you choose). Your subscriber status determines what fee you have to pay. Read more about subscriber statuses here.
- Vendor processing or access fees. Databento doesn't charge processing or access fees; however, other data providers may do so. These fees are for services like customer support and monthly exchange reporting, and they're typically added on top of the monthly exchange license fee.
- Data usage fee. Every data provider charges a usage fee of some sort. This fee helps us aggregate data, create various customizations, provide a seamless user experience, and keep our business afloat. At Databento, we offer both flat-rate pricing and usage-based pricing.
In this section, we'll share general information about exchange license fees. Read the article in full, or navigate to a relevant section via the highlighted FAQs below.
2.1 How do exchange license fees work?
2.2 Do you have a list of each exchange's license fees?
2.3 How can I decrease or avoid exchange license fees?
2.4 Why do some data vendors charge license fees and others don't?
2.5 Is it possible to avoid license fees by getting delayed real-time data?
Instead of a single fee, exchanges want to charge market participants based on how they're using data, so they set a list of rules and prices. For example, a high frequency trading firm will pay a different fee than a fintech app. The fees may be higher or lower depending on the venue, and there are some instances where a fintech app pays more than an HFT firm for access to the same data and vice-versa. Learn about common fee categories below, or see this article for details.
License fees are complex and ever-changing, and it's tough for any vendor to give concrete examples relevant to your specific situation. Even if you plan to work with a data provider, we strongly recommend speaking directly with the exchange to understand which subscriber category (and fees) your company falls under.
When speaking with the exchange, be sure to mention that you plan to use a third party data provider. This will usually lower your monthly license fee.
If you plan to work with Databento, we're happy to introduce you to our exchange reps to begin the licensing process. To save time, please provide us with your company's address so the exchange can assign a regional representative to speak with you.
Since fees are constantly changing, we've provided direct links to each exchange's website (when available) for the most up-to-date information.
These websites are complex and confusing. Thus, we've broken down the minimum Nasdaq real-time license fee as a loose example (but please don't quote us on this, as fees vary greatly):
Nasdaq's lowest fee for professional users is roughly $2,051/month. This is broken down as follows:
- Nasdaq TotalView Internal Distribution: $1,500 per month; plus
- Nasdaq Admin Fee: $100 per month (admin feeds are paid only once so if you have another subscription, this is waived); plus
- Nasdaq Depth Non-Display Usage Fee via Databento: $76 per subscriber per month.
- Note: $375 per non-display subscriber is only for RAW data delivery from a colo setup or an extranet setup.
Every venue has a different fee structure, so you can consider switching to a venue with lower fees (e.g. IEX is cheaper than NASDAQ for US equities data). However, the markets are fairly efficient: people usually tell us that they find greater value in markets that charge higher fees.
You can pay $0 license fees for real-time data in rare cases:
- Databento's DBEQ bundle offers US equities data with $0 exchange license fees. This dataset is a bundle of US equities proprietary feeds from NYSE Chicago, NYSE National, IEX, and MIAX Pearl Equities, which are free to license for distribution, display, and non-display applications and is ideal for web apps, brokerages, systematic trading, and cloud-based environments.
- In the FX space, some venues will waive the license fee if you're a trading participant in their market. This is not common in most other markets.
- Note that some vendors don't break down their fees, but that the license fee is always included in the overall fee. The data vendor must pay a monthly license fee on your behalf to each venue, so it must be included in order to break even.
- The only other way to avoid license fees is to make changes to your business strategy. For example, consuming data on a T+1 basis or changing your product to fall into a lower tier of fees. The significance of these changes is akin to a pivot, and thus it's not recommended unless you're in an exploratory phase of development.
All vendors must charge a license fee if it's required by the exchange or venue, or the exchange charges the fee directly to the user. Vendors like Bloomberg charge one overall fee that includes the monthly license fee. They'll pay the license fee to the exchange on your behalf.
- Note that some vendors hide the license fee until the end of the data-buying process to lock customers in.
- Note that a license is not required for historical data.
When available, delayed data is often cheaper than real-time data. However, a license is still required.
- Exchanges require a license for any intraday or delayed data.
- Anything T+1 (24 hours and earlier) doesn't require a license.
In this section, we cover how to determine your subscriber status including display vs. non-display, and professional vs. non-professional. You can also access the other articles in the series via the links below.
3.1 What's the difference between professional or non-professional subscriber status?
3.2 What's the difference between display and non-display subscriber status?
3.3 What's the difference between internal use and redistribution?
3.4 How do I calculate the number of devices to report?
3.5 When and how do I report my device count?
Professional subscribers are typically defined as individuals or entities using market data for commercial purposes, such as trading, analytics, or product development. Professional subscriber fees are usually higher compared to non-professional subscriber fees.
Non-professional subscribers are typically individuals who are using market data for personal, non-commercial purposes, such as personal investment decisions or educational purposes. Feel free to contact us if you still need help determining your subscriber status.
Display subscribers use market data in a way that involves presenting the information to end-users in a visible, readable, or audible format. This could include displaying market data on trading platforms, financial news websites, or any other interface where end-users can access the information directly.
Non-display subscribers use market data in ways that don't involve presenting the information directly to end-users in a visible or audible format. This could include using the data for algorithmic trading, internal analytics, or other non-public, backend applications. Non-display fees are usually higher than display fees.
Internal use refers to the subscriber's use of market data strictly within its own organization for its internal purposes. The data is not shared or disseminated to external parties.
Redistribution occurs when the subscriber disseminates or shares the market data with external parties beyond the original licensing agreement. This can include providing the data to clients, customers, or other third parties. Even if you're using a third party data provider, the exchange requires a redistribution fee. Note that some exchanges require a redistribution fee for historical data as well as real-time data.
The definition of a device can vary. It may include physical devices (e.g., computers, terminals, phones) or user IDs/accounts that access the market data. Some agreements may count devices on a concurrent usage basis, while others may count registered devices over a specific period.
Exchanges usually charge more if you're consuming market data via multiple devices.
In short: Depending on your arrangement, you'll either report directly to the exchange each month, or Databento will report on your behalf each month. There are some exchanges which allow you to report on a quarterly basis, but monthly reporting seems to be the standard.
If you report directly to the exchange, they'll usually have you register on their website for the purpose of filing the monthly report. Late reports may be subject to charges or penalties depending on the exchange.