The new economy of services like Uber and Airbnb are like Marmite: you either love them or hate them. But whichever side of the fence you sit on, you can’t deny that both have proved disruptive forces in their respective industries, and that the end result should be a better deal for consumers—whether or not it’s these providers who deliver the better deal, or whether they merely force incumbents to respond more competitively.
One such disruptive force profiled in this week’s issue is Airex, a provider of an online marketplace of third-party content that the vendor says “democratizes” access to information and tools, and which Interactive Brokers is using to build a co-branded marketplace of content services that its institutional and retail clients alike can access, and which will complement—and perhaps ultimately dwarf—its own existing Investors’ Marketplace portal of third-party content.
Airex’s model is not to be an aggregator, but rather a storefront from which traders and investors can choose research, trade ideas, analytics, and so on. And while that’s a relatively new concept in the capital markets, it’s one that most people are already familiar with on a daily basis—think Amazon.com or iTunes.
“I think that for the long-term foreseeable future, there will continue to be a market for the large, monolithic terminal businesses. I don’t see these going away anytime soon or ever. However, while Bloomberg, for example, has around 325,000 terminals, that’s still a tiny fraction of the global demand for financial information,” says Airex chief executive Stephen Kuhn. “What Airex does is eliminate the fixed cost of sales, so it frees up supply and demand… and gives even the smallest investor a user interface with one username and password to access everything. It democratizes supply and demand, just as every other industry—books, music and travel, for example—has already been disrupted. The financial services industry has not yet reached that level of disruption and efficiency.”
This isn’t entirely true, insofar as the retail financial services industry actually has undergone disruptive change. It’s far easier now for the average investor to get their hands on data and analytics that were once reserved for trading floor professionals, enabled by the proliferation of relatively high-performance mobile computing devices and the app store model of information dissemination and consumption.
However, in capital markets, this level of plug-and-play data access is still some way off, though the key foundations have been laid and forward-thinking architects are now figuring out how to take the next steps—one of which may be more widespread adoption of the OpenMAMA open-source middleware initiative, which will make it easier for firms to deploy vendor-agnostic, best-of-breed data infrastructures that allow them to splice together whatever data sources they want, rather than the ones their platform ties them to.
Am I saying that we’ll see legacy on-site market data platforms disappear entirely? Like Kuhn, I think this is unlikely for the forseeable future, especially since there is so little competition in that area. However, since competitive advantage is increasingly determined by what intelligence you can derive from data rather than how quickly you can get it from one point to another on your infrastructure, there’s no reason to cling to your on-site platform unless you’ve achieved some top-secret, game-changing goal with it. So why not shift it to run remotely, or in the cloud, or on a utility basis, leaving you free to focus on real areas of competition?
Disruption is always a tough sell: ask companies like Xignite, who have led the way on new models for market data distribution, having to carve out specific use cases on its way to achieving more enterprise-level uses, such as its new CloudStreaming service. But when given the choice, why not embrace disruption, rather than resist it? After all, when was the last time a taxi ride gave you a competitive advantage?
Bill Murphy, CTO of Blackstone, once again joins the podcast to discuss the private equity firm's new offices, designed to house its innovations team.Subscribe to Weekly Wrap emails