The market data business is increasingly governed by the need to diversify to respond to market and investment trends. Trading firms seeking exposure to new opportunities diversify the datasets they consume in search of the one that will give them an extra edge, while data providers are constantly diversifying their content, either creating new datasets in-house, seeking out potential partners that can supply a specific dataset, or developing new analytics that allow us to combine and scrutinize existing data in new ways.
For example, Bureau van Dijk Electronic Publishing has expanded the breadth and depth of its fundamental data on listed companies around the globe. In some of these cases, BvD was expanding existing data, and in some cases is sourcing the data itself, while in others—for example, in Africa and Central and South America, where it’s harder to obtain reliable data—it is using niche local providers where partners are a necessity
Another example of someone using partnerships to diversify its content is German data vendor VWD, which is adding US Treasury data from Tullett Prebon Information to its Market Manager terminal, in response to demand from European clients for more US data. The relationship with TPI—which includes prior deals for the broker’s data—works out well for both companies: not only does VWD diversify its content lineup with data that might be more expensive and time-consuming to source elsewhere, but TPI gains revenues from the VWD clients that subscribe to the data. And when VWD signs content deals with other partners that include TPI’s data—such as with German software provider Bellin—both vendors win, and TPI gets to diversify its business not just to partners and their clients, but also its partners’ partners.
Similarly, S&P Capital IQ is pursuing a “rapid expansion” of its research and estimates coverage in Latin America and Asia Pacific, using local staff to build out its network of contributing broker-dealers and third parties, which currently numbers 1,400 sources in 120 countries.
And diversification is a big factor behind the London Stock Exchange’s proposed acquisition of US index provider Russell to merge with its own FTSE index business, to give the LSE and FTSE a bigger foothold in the US market, and specifically in the exchange-traded fund marketplace, at a time when the providers expect the passively-managed investment sector to grow at a compound annual growth rate of 18 percent between now and 2020.
LSE’s plans to consolidate the technology platforms that FTSE and Russell use to calculate and distribute their index data will doubtless please both company execs and shareholders, as a result of reducing three sets of platform costs into one. However, LSE’s plans to “migrate [Russell] to a fee policy and a commercial approach closer to FTSE” may not sit so well with some of the Russell management that LSE has put specific provisions in place to retain. Like some of its rivals, FTSE has gained a reputation—rightly or wrongly—for aggressively chasing revenue via commercial policies. And it shows: For the most recent financial year, FTSE’s index revenues were $296 million, compared to Russell’s $162 million, despite FTSE having $1.2 trillion fewer assets benchmarked to its indexes.
And as commercial policies become more convoluted and complex, and the demands of the data industry become more diversified, so must the expertise of the professionals that deal with market data. This is proving especially true in marketplaces outside the main global financial centers, where professionals don’t get the same level of exposure to broader experiences beyond highly localized issues. Hence, as the latest body to adopt industry association FISD’s Financial Information Associate certification, the Johannesburg Stock Exchange is not only making its own data staff take the exam, but is also promoting it to its clients and other regional exchanges, blazing a trail for others to pursue a more diversified approach to data management.
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