If you read last week’s story about Burton-Taylor International Consulting’s survey of data industry spend and market share, it may have been with a hint of nostalgia for years gone by when data behemoths would battle for market share. But I wonder if we’ll ever see vendors of that scale—at least, ones that achieve it organically, like Bloomberg, rather than merely through acquisitions—again, as the market moves to a patchwork landscape of smaller content specialists, each integrating and cooperating with one another.
For example, FactSet—which overtook Interactive Data as the third-largest vendor, according to the Burton-Taylor survey—has incorporated sentiment indicators from news sentiment analysis provider RavenPack into its workstation to meet demand from buy-side traders wanting an additional input to their investment decisions. Whereas in the past, a top-tier vendor may have built these measures in-house, the industry now thinks nothing of companies partnering where they are not in direct competition, and where it is easier to license someone else’s content than duplicate it in-house.
In another example of content cooperation, SunGard has expanded the energy data it sources from Platts to include real-time data, alerts and commentary, in part for SunGard to develop its own service for energy and commodities traders.
Of course, there are risks to this strategy of “coopetition.” The upside is that your clients get access to new datasets. The downsides are that you may be arming a competitor with the ammunition to steal away clients, and that a company can quickly become very over-exposed to one particular provider—something that FactSet officials probably remember from a dozen years ago, when the vendor began an acquisition strategy with the purchases of Lionshares, Mergerstat and JCF, having previously sourced a large part of its data from Thomson Financial, which at the time was said to be considering curtailing its third-party distribution.
And for those creating the unique content, demand is driving them in different directions: For example, social media sentiment indicators provider Social Market Analytics is expanding the delivery mechanisms by which it gets its social media-derived indicators to clients, in response to more traders wanting to incorporate its inputs into their investment decisions. As SMA chief executive Joe Gits puts it, social media as a dataset is already demonstrably moving markets, but professionals need ways to better understand how to use and manage it.
Part of making this easier is the creation of a web-based dashboard that visualizes the impact of the social data, while another part of the puzzle is—in another example of integrating third-party content—incorporating news from Seeking Alpha that provides more context about the underlying market events. And in yet another example of integration—indeed, another case that demonstrates the value of news and context alongside traditional price data—trading platform vendor PFSoft has incorporated news from UK newswire Alliance News into its Protrader trading platform to support those trading multiple asset classes beyond just equities or foreign exchange, where Alliance and Protrader have their respective origins.
Meanwhile, to support a move into the Americas markets, commodities data management and analytics provider DataGenic is having to source a new local data from a diverse range of exchanges, vendors and government bodies to support the constantly evolving needs of commodities traders—though this approach probably has more to do with the challenges of obtaining a full dataset rather than any conscious decision to spread out its sourcing approach.
That said, just as consumer firms seek to minimize their exposure to being tied in to one supplier, vendors that consolidate other companies’ data must also be mindful of the same risks—that cooperation is fine while you share a common goal, but may revert to cutthroat competition if your or your partner’s priorities change.
Waters Wavelength Podcast Episode 97: C-Level Execs Talk Bitcoin, Fintechs, Cognitive Computing & Open-Source Tech
In separate interviews, executives from AQR, JPMorgan, Cboe and IBM discuss topics permeating the capital markets.Subscribe to Weekly Wrap emails
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