A market data adapter is the software component of a trading system that connects to a source of market data, such as an exchange feed or a data vendor, and translates what it receives into the format the rest of the system uses. It is also called a feed handler. Every venue publishes quotes and trades in its own protocol, often a compact binary format, so an algorithmic trading platform needs one adapter for each source.
The adapter decodes each message, checks sequence numbers to detect lost packets, requests retransmission where needed, and converts the result into normalised events such as a trade, a quote change or an update to the order book. Strategy code can then be written once and run on any market. Because every tick passes through it, the adapter is a critical point for low latency designs, and the fastest are built in hardware. It must also cope with bursts of tick-by-tick data without falling behind.