So 2021 is finally here, and seemingly continuing as 2020 left off. However, I see no harm in indulging in helpful optimism. Personally I believe the world of market data is one of the most dynamic out there, even if somewhat boring. However, without market data financial markets could not function effectively nor efficiently. There is an exciting future ahead with the expansion of ‘data democracy’ to the mass retail markets, and the innovation wrought by FinTech and its siblings, Wealthec, LawTech, and that red-headed stepchild, RegTech.
So here are my 5 predictions for the world of market data in 2021 which will be developed further in 5 short articles:
- Turning Data into Dollars. More companies will realise (or believe) they are sitting on data goldmines and seek to commercialise their data. Sadly many will fall by the wayside because they do not understand how to value their data, build a functional data business, or underestimate what needs to be done. On the bright side the committed (and smart) will reap the rewards of not only generating new high margin revenue flows but driving trading flow back into the underlying business, so creating the virtuous data circle. Benchmarks, commodities, and commercial data will be in vogue
2. Mergers & Acquisitions. The S&P Global/IHS Markit mega-merger will start a trend of data players seeking entry to the market data industry via purchasing high grade digital assets built around original works (indices and benchmarks) and decision making tools (analytics). This asset scramble could well attract large outsiders like Google, Amazon, and Comcast, challenging existing players and exchanges such as Moody’s, MSCI, the Chicago Mercantile Exchange, all with deep pockets, for a competitive edge by buying out mid-range companies with unique presence, i.e. Factset, Morningstar, Rimes, along with IP driven specialists
Look out for a Bloomberg blockbuster
3. Discovering New Markets. Exchanges, Data Sources, and Vendors will finally wake up to the realisation their core client base the financial institutions have hit data saturation point. The Banks have too much data and wastage is endemic. Equally as all institutions all have the same data it is hard to compete, so the Banks are searching for new sources and investment decision tools to create advantages. This means the data producers and distributors will set off on the adventure of discovering new markets. The fluidic worlds of third party data processing, data facilitation, wealth management, High Net Worth Individuals and the mass retail market beckons. One slight problem, they do not have the right business models
4. Discovering New Business Models. Exchanges and Data Sources will discover their existing business and pricing models don’t work for them, nor their clients, nor their potential new markets. This will lead to an overhaul in business strategies, pricing models, data workflows and partnerships. Improved structures will target two specific areas, firstly tailoring services and pricing around real world market data usage, and secondly the high levels of revenue leakage that is occurring though poor and ineffective reporting. By adopting smarter business models this will also have the added benefit of blunting the impact of ill-informed regulators will almost certainly have if they seek to gerrymander the data marketplace.
5. Intellectual Property Rights. Exchanges and vendors will learn that most market data contracts, licences, and data usage policies are not fit for existing purposes, let alone being adaptable to service new markets with different types of clients exhibiting alternative behavioural characteristics. These are currently snapshots in time, so too often out of date by the time they have been introduced. This means data sources and vendors have a choice of either replacing IP documents in shorter time frames, with all the administrative work, and obstructionist tendencies that entails, or introducing smarter processes by constructing greater cohesion between applying IPR structures to their new business models.
In the world of market data change is already a constant by its very nature, the creation of new data in itself drives change, and the more data that gets produced in turn generates even more data. The data cycle is dead, the forever expanding data spiral lives.
In 2021 the dynamism that lies behind the myriad ways data becomes malleable for new purposes will be the driver for change as it forces all 3 in the traditional data chain, i.e. 1, data sources (Exchanges/IDBs/Index Creators), 2, the vendors, and 3, the data consumers to alter their perceptions of the existing market, how it operates, and embrace new markets which operate outside the comfortable parameters that in realty have ceased to exist.
That is an exciting prospect.
HAPPY NEW YEAR!
Keiren Harris 05/01/2021
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