The Big Three

No matter what the smaller data vendors may say, the world of real-time market data is dominated by three companies: Bloomberg, Reuters and Thomson Financial. Ask any market data manager what they're thinking about, and at least one of the three is sure to be at the top of the list. The statistics from Inside Market Data Reference (which will be announced this week) merely confirm that, demonstrating the threesome's dominance in terms of screen count and market share.

So, four months into 2005 and on the eve of Inside Market Data 2005, where does each of the three stand?

As the saying goes, a rising tide lifts all boats, and that's certainly what happened over the past year. The improved market and increased spending among customers meant that Bloomberg and Thomson saw significant revenue increases. Reuters isn't complaining either, given that the slide of its recurring revenues continues to slow on schedule.

Yet despite these improvements and each vendor's jockeying for market share, none was able to eat into the others' core markets.

Any market data manager will tell you that when it comes to the trading floor, it's between Reuters and Bloomberg. And when you talk about investment banking or research, Thomson is the one with the edge.

Thomson often gets criticized for not making it on the trading floor. But is that so bad? Can't a vendor be successful without dominating the trading floor? Yes, the trading floor is where all the money is made (or at least a lot of it), and that's where most of the egos reside. But we don't see why Thomson shouldn't acknowledge the current state of play and focus on other areas instead. In fact, that seems to be what it's doing.

This may be particularly wise in the current market, where there is so much interest and investment in algorithmic and black box trading. Here the traditional model—selling market data terminals that are priced according to the number of "bums in seats"—no longer applies. And as Reuters and Bloomberg jockey for favor in this unsettled market, Thomson has a chance to grab some serious market share, but only if it can produce a deep enough and fast enough datafeed to satisfy these trading operations.

Of course, algorithmic trading groups are not the only ones looking for direct datafeeds, and this again presents the possibility of a shake-up in the market. But so far, Reuters is the only vendor willing to go on the record about its direct feed plans, and even its officials prefer to be vague about the details.

At the same time, the next 12 months may be the best chance for smaller vendors and the exchanges to make their mark. The challenge for these companies is to overcome the customers' traditional preference for the vendor they know and the inertia that works against dropping an incumbent service. Then again, if the upstarts and the exchanges can make a good enough financial case, all bets in favor of the incumbents are off.

Speaking of incumbents, we can't examine the market data landscape without a brief eulogy for Telerate. Its acquisition by Reuters is due to close shortly, and we don't expect to see the Telerate name much more after that. How odd it is to watch one of the pioneering market data vendors quietly slip beneath the waves. Perhaps that is a sign of how much the market has changed from the days when Telerate was the source for bond data. Hmm, maybe we shouldn't be so quick to place our bets after all.

Samara Zwanger