Quick definition A SIP consolidates real-time trade and quote data from multiple exchanges into a single unified feed. The SIP feed is the official source for the best bid-offer (BBO) across all venues. What it is In the US, there are three SIP operations, run by NYSE, NASDAQ, and CBOE. Each SIP receives data from multiple exchanges and publishes a consolidated feed. The SIP collects: - Every trade (price, size, venue) - The best bid and ask from each venue - The consolidated best bid-offer (BBO) across all venues All market participants can subscribe to the SIP feed to see the official BBO. Why it matters The SIP provides authoritative market data. Brokers must route orders to the venue with the best BBO (best execution requirement). The SIP is the official source for determining what the BBO is. The SIP also provides transparency. Market participants know what prices are available on which venues. SIP latency SIP latency is typically 100-250 milliseconds, which is considered slow for HFT but acceptable for most traders. This latency is a bottleneck; some traders prefer direct feeds from exchanges, which are faster. Practical example You are a trader at a hedge fund. You want to buy 100,000 shares. You check the SIP feed to see the current BBO: - Best Bid: 150.42 (from NYSE) - Best Ask: 150.43 (from NASDAQ) Your broker must route your order to NASDAQ to achieve best execution (the best ask). If they routed you to NYSE at an ask of 150.50, they would be in violation of best execution rules. Direct feeds versus SIP Large traders often subscribe to direct feeds from each exchange (ITCH from NASDAQ, TAQ from NYSE) because these are faster than the SIP feed. But the SIP feed is the official source for compliance and best execution determination. Cost SIP data subscriptions are typically affordable for professional traders but may be expensive for retail traders. See also - National Best Bid-Offer (NBBO) - Best Bid-Offer (BBO) - Consolidated Tape - Best Execution
