Test: Best data feed provider and uses

[andmm]

I have the following test to make:

____________________________________________________________________
An online trading bank is looking for a new feed provider for overnight interest rates for Brazil Real(BRL). There are 3 potential providers, and each provider has delivered a sample feed for their overnight mid-rate which is shown in box below.

Feed from potential providers:
Time stamp Provider A Provider B Provider C
1 Jul 12:00 GMT 8 8,5 8,5
1 Jul 14:00 GMT N/A 8,45 8,5
1 Jul 15:00 GMT N/A 8,55 8,55
1 Jul 16:00 GMT N/A 8,57 8,55
1 Jul 18:00 GMT N/A 8,56 8,55
1 Jul 21:00 GMT N/A 8,45 8,55
2 Jul 00:00 GMT N/A 8 8,55
2 Jul 03:00 GMT N/A 8 8,55
2 Jul 06:00 GMT N/A 8 8,55
2 Jul 08:00 GMT N/A 8 8,5
2 Jul 10:00 GMT N/A 8,43 8,5
2 Jul 12:00 GMT 8 8,52 8,5
2 Jul 15:00 GMT N/A 8,54 8,5
2 Jul 18:00 GMT N/A 8,7 8,5
2 Jul 21:00 GMT N/A 8,55 8,6
3 Jul 00:00 GMT N/A 8 8,6

http://tinypic.com/r/34tbw9t/6

1)Please prepare 1 slide listing where/how the BRL interest rate is being used. (An example of usage is deposit interest on client accounts held in BRL)

2) Please prepare 1 slide with recommendation of which feed provider to select. You must base your answer on the usage of the interest rate from above.
_________________________________________________________________________

My answers so far:
1)

CFD: Long position: Pay the domestic interest on the underlying asset (stock/commodity/FX)
Short position: Receive interest on the underlying asset

Short selling stocks: Borrowing cost of the shorted stock.

Carry-trade: borrow money in a low interst markets, use the funds to by bonds in a high yield market.


2)
Provider B because the data seems to be updated more frequently.


Any other suggestions?

 

[RichardDale]

It's impossible to recommend a data vendor based on the above data.

You need to determine why each data provider is different. Look at:
a) Source - what source is used
b) Does the data represent an actual trade, a mid-point of a bid-ask spread, bid or ask, low-volume after-hours trading that is probably best ignored.
c) Is the daa repeated when no changes occur (either a trade, or a change in the bid-ask spread etc.) or does it show N/A in this circumstance.

I don't know much about the BRL interest rate market to give any specific advice about that instrument.

Consider the interbank spot FX market. There is no central exchange and no central reporting of trades. The only thing that is reported by contributors is a bid-ask spread, with a specific timestamp associated with that spread. Trading is performed bilaterally (that is, direct between one dealing desk and another). There is no such thing as "official" FX data because some provides use bid, some use ask, each provider will have a different set of contributors etc. In busy times on a large multicontributor feed there can be dozens of contributors submitting contributed rates simultaneously. When the timestamps all match, which do you choose? An average? The last one in the queue?

Hope that helps.

 

[andmm]

It's impossible to recommend a data vendor based on the above data.

You need to determine why each data provider is different. Look at:
a) Source - what source is used
b) Does the data represent an actual trade, a mid-point of a bid-ask spread, bid or ask, low-volume after-hours trading that is probably best ignored.
c) Is the daa repeated when no changes occur (either a trade, or a change in the bid-ask spread etc.) or does it show N/A in this circumstance.

I don't know much about the BRL interest rate market to give any specific advice about that instrument.

Consider the interbank spot FX market. There is no central exchange and no central reporting of trades. The only thing that is reported by contributors is a bid-ask spread, with a specific timestamp associated with that spread. Trading is performed bilaterally (that is, direct between one dealing desk and another). There is no such thing as "official" FX data because some provides use bid, some use ask, each provider will have a different set of contributors etc. In busy times on a large multicontributor feed there can be dozens of contributors submitting contributed rates simultaneously. When the timestamps all match, which do you choose? An average? The last one in the queue?

Hope that helps.

Ok, but this is the only information I have. I know that it is a mid-rate of the bid ask interet rate: "overnight mid-rate which is shown in box below".

What if it was a LIBOR intret rate, what type of products value is depending on this? Just so I can mention more products than CFD etc. (dont think they are interesting in a more overall usages such as discounting etc.).
But then the trade is preformeded, an the finance (interets) cost of ex a CFD is reported, is it normal to use data from a feed provide,r or can you somehow get a more official datafeed?

 

[RichardDale]

Without knowing sources or what the information represents (which exchange/source it comes from) you cannot draw any conclusion from it.

Clearly there are 3 different data sets with 3 different series of parameters - all of which are unknown.

 

[andmm]

Without knowing sources or what the information represents (which exchange/source it comes from) you cannot draw any conclusion from it.

Clearly there are 3 different data sets with 3 different series of parameters - all of which are unknown.

Thanks, it was a trick questions that could not be solved without further details.