Exchange data revenues increased nearly a third in 2016

Exchange data and index fees brought in $5.4 billion globally last year, as exchanges look to move away from depending on transactional businesses.

Global exchange revenues totalled a record $28.3 billion in 2016, with exchange data fees increasing almost a third and totalling a fifth of global revenues, according to new research.

A report from Burton-Taylor, an international consultancy,  highlighted industry revenues were driven by a 29.2% increase in exchange market data businesses, with the segment reporting record revenues of $5.4 billion last year.

Intercontinental Exchange (ICE) accounted for almost 16% of total industry revenues, as its market data revenues reached $2.4 billion, surpassing revenues made from its traditional trading and clearing business.

The report highlighted how market data and index revenues now represent the second largest segment in the industry, accounting for around 20% of global exchange revenues.

Exchanges have increased their M&A activity in the data and index business, as incoming regulations in Europe such as MiFID II create greater demand for data services.

Last year, ICE completed the acquisition of Interactive Data, and this year it has expanded its index business by purchasing the Bank of America Merrill Lynch (BAML) fixed income indices platform.

In June, the London Stock Exchange acquired Citi’s fixed income index business for $685 million.

Exchanges are looking to evolve their business models in a bid to diversify and move away from a dependency on transactional businesses. 

“The combination of weak trading volumes and emerging competition is forcing incumbent exchanges to dramatically expand their focus on new business segments,” said Andy Nybo, director at Burton-Taylor.

“Market data and index businesses are the current target of these expansion efforts but exchanges are constantly searching for new opportunities to expand their offerings, especially as new competition threatens to erode existing operating margins and profitability.”

However exchanges have been frequently criticised from both banks and buy-side firms alike for their monopolistic dominance on market data costs by ramping up data fees, as well as introducing complex and strict new data licensing measures.

At an industry conference last month, a Dutch-based asset manager explained his firm’s data fees amounted to €3 million last year, with costs rising 30% over 12 months.