The US election may be over, but the political posturing that goes hand-in-hand with politics, remains. We congratulate President Barack Obama on winning four more years in office, and trust that his second term will be able to deliver the kick-start that the slowly-recovering US and world economies so desperately need, and be constructively supported by those on all sides of the political divide.
Since the lows of 2008, the economy has improved significantly in important areas—key indicators have risen consistently, home values are rising again, and unemployment rates are starting to fall—yet this year, I’ve sensed a certain stagnation in the financial markets: Exchanges aren’t seeing the same levels of peak volumes—or volatility, thankfully—trading firms are starting to question the massive levels of investment required to compete in the low-latency race, and investment firms of all kinds are weighing spending decisions, eking out every last day of trial periods, and putting off spending decisions for as long as possible.
Eventually, I put this down to 2012 being an election year, and firms not wishing to spend on big projects that might be rendered worthless if regulations changed following the election, or if tax policies prompted different strategies at the corporate level. For example, one area where TradeStation Securities is spending on a multi-year project is to implement faster risk checks on client orders, using McObject’s eXtremeDB Financial Edition database.
Whatever the cause, the belt-tightening doesn’t only affect US firms: Panelists at last week’s Asia-Pacific Financial Information Conference outlined their firms’ budget constraints and the steps they are taking to reduce data spend.
Of course, this doesn’t help data managers: data fees will always rise (even if only by reasonable amounts), regardless of firms’ budgets. Vendors, exchanges and brokers are all ultimately in the business of making more money—and that’s not a criticism; it’s good business. To raise the revenues required to create new data products that add value, they increase fees; firms pay more, and (theoretically) gain more value from the data, hence make more money, and can afford to pay more for it; then exchanges and brokers can charge higher fees to fund development more new products, such as Nasdaq OMX’s latest initiative to reduce latency using radio frequency to distribute datafeeds: in theory, it’s a virtuous circle—a rising tide that floats all boats.
Indeed, third-quarter financial results for Canadian exchange TMX Group showed a 10 percent rise in data revenues to C$45.5 million, boosted by the acquisitions of the Alpha ATS and TMX Atrium, even though total group revenues fell by C$5.5 million. It was a similar story at Nasdaq and CBOE Holdings, though other exchanges weren’t so lucky, with Deutsche Börse, CME Group and NYSE Euronext all recently reporting overall revenue declines as well as slides in data revenue.
That’s why it’s so important that government creates an environment that encourages stability and growth, while regulating strictly and effectively, so that Wall Street can return to prosperity—but not at the expense of investors, whose savings and investments need protection. At its simplest, the cycle of boom and bust is caused by greed—wanting more than the system can support. If we put aside our lust for excess and focus on achieving sensible results—in both our financial and political systems—then we’ll all be better off, financially and as a society.
But in the meantime, there are still many in New York and New Jersey who are without homes and heat in the aftermath of Hurricane Sandy, as temperatures dropped and snow fell in the area last week. So we again urge readers to give generously to the US Red Cross, which is leading efforts to help those in need. You can find out how to give money, blood, or your time at redcross.org. Because while we can complain about the markets and the cost of data, those affected by Sandy need attention more urgently than us.
Adam Sussman joins Anthony Malakian to talk about Liquidnet's acquisition of OTAS, machine learning and AI, and what the buy side wants from analytics platforms.Subscribe to Weekly Wrap emails