Exchanges: No Free Data; Maybe Free Trading?

"Increasingly, trading platforms are competing for the same kind of underlyings. New regulation is going to continue to foster that kind of environment. Going forward, trading will become more like a commodity that you can get everywhere. But what you can't get everywhere is the data. The only value-add item will be the data," said Hartmut Graf, head of the information department at Deutsche Börse, adding, "Wouldn't it be better just to make trading free and charge for data only?"

Ross Stuart, senior director of global data licensing services at CME Group, described his time at the London Stock Exchange, to illustrate how the current landscape of ongoing regulation is unlikely to damage data's value. In 2007, the introduction of MiFID saw trading fragment between multiple exchanges and multilateral trading facilities. "LSE was finding that for its FTSE 100 stocks, it was commanding less than 50 percent of the market share... but the data was still essential for those wanting to trade on the other markets," he said.

While the regulation was damaging for the trading side of the business, "It didn't diminish the value of the data because it was still so important to have all of the answers... to be able to trade in an informed manner elsewhere," Stuart said.

Winnie Poon, head of market data at Hong Kong Exchanges and Clearing, agreed. Trading firms come to HKEx because "We create the market data, and no one can get the same market data from anywhere else.... We are well positioned to add value to the transaction cycle," she said, adding that if you can't get a product anywhere else, there is no reason why it should be offered for free.

Jutta Werner, head of content partners in Asia at Thomson Reuters, who moderated the panel, cited MiFID 2's mandate that data must be made available on a reasonable commercial basis, and asked whether this guideline would impact existing fees for market data.

Graf said that while the directive does require exchanges to follow certain practices, it also presents opportunities. "We have to adapt to a certain framework for justifying our market data fees. That will have an impact on the standardized market data which we are going to put out. But that [standard data package] is not necessarily everything that people are looking for. Market data as a whole is going to grow, and there is much more data that people are going to consume. Overall, this will be a positive impact on the data business as a whole," he said, adding that while the rules will put some constraints on what Deutsche Börse charges for market data in future, the fact that the rules say data should be available on a reasonable commercial basis-and not free of charge-means the regulators acknowledge that data has value, Graf added.