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  • Insights
  • Tuesday 26th April 2022

Monetising Exchange data, what is really happening?

We are having some insightful conversations with exchanges and their customers about how exchange data is procured, delivered and consumed. There is a demand from consumers to have more innovative products around real-time and historical exchange data, and the exchanges are increasingly looking to fulfil those demands. To better understand the trends to inform our clients, we asked the market for their views and opinions. The survey was independent and anonymous, and the results are not officially verified. However, it has provided some food for thought.

The demand for exchange data is on the rise

Trading firms in search of Alpha are increasingly data-hungry. They need to power the rising tide of intelligent new AI and ML analytics platforms with real-time and historical data, without which they are useless. Moreover, traditional exchange revenues are declining prompting exchanges to search for new income streams (Question 4 – see results below). So it’s only natural that the market is looking at how to commercialise these in-demand data sets better.

Are the Exchanges currently independently selling their data?

  • All of the exchanges we spoke to declared that they sell their data directly to end customers. (Question 1 - see results below)

  • 80% of the trading firms said they want to consume exchange data directly but are struggling to do so. (Question 8 - see results below) 

One theory, validated by our survey, is that each consumer wants to ingest data in multiple formats – whether in Excel, Python, JSON over WebSockets or Jupyter notebooks, etc. (Question 6 – see results below). And based on our experience working with some of the world’s leading exchanges, they don’t have those capabilities because building APIs is hard. It takes deep domain expertise and robust technology to create all the endpoints and allow vast sums of data to flow through them seamlessly. Furthermore, real-time and historic data pose quite different technological challenges. So even if you have the skills in-house, does it make business sense to spend time and money developing proven functionality that is readily available?

Our survey suggests, there is a disconnect between the exchanges believing they provide data products that are fit for purpose and the market not always agreeing. But we can’t blame the exchanges entirely, I think it’s fair to say that it is still early days, but they are heading in the right direction.

So how can the Exchanges effectively and quickly meet this growing demand?

There are a few non-negotiables when it comes to creating a compelling data monetisation function within an exchange:

  • Flexibility - The data needs to be made available across multiple channels, which can grow and flex as the firm and consumer requirements change. 

  • Historical Data is essential - There is a massive appetite for the invaluable historical data sets Exchanges have amassed over the years. Flexible purchase options are hugely important to customers

  • Speed to market - Although many exchanges are somewhere on this journey, we know that the demand for data is immediate and urgent. Monetising data is more straightforward than one might think, especially with the right technology and the support of an expert team.

Dare to be different

Global economic volatility has increased the pressure on financial firms to re-evaluate their business models. As a result, most are searching for new ways to retain existing customers and gain market share. In the trading arena specifically, this is driving the demand for smart analytics, utilising powerful AI and ML tools. Indeed, some of our data generating clients are already shaping ‘The business of tomorrow’. They have recognised that offering a variety of flexible data consumption methods that are easy to use will entice many more buy-side counterparts to work with them. To help them achieve this ambitious goal, they selected MDXT because it provides them with the speed and flexibility they need to build tailored models and in turn providing a significant competitive advantage. 

The debate doesn’t stop here

There is a lot to talk about, so please get in touch if you want to discuss the survey results or have other ideas to share. We would love to hear your views on this important and highly topical subject.