Reclaiming the Market Data Value Chain: Leveraging the Cloud to Optimise Distribution and Product Innovation
This report examines the current landscape of market data distribution, including the relative merits of different data commercialisation models that are adopted by data providers. It also discusses how cloud migration can help optimise existing distribution and product innovation processes, as well as the strategic and operational factors to consider when migrating to the cloud.
Benjamin Quinlan, Justin Chung, Alison Hu, and Jeanny Ang
This report highlights current challenges faced by financial market data providers and vendors, the impact of cloud adoption, and the strategic, financial, and operational considerations for effective data monetisation.
The demand for financial market data is increasing at a rapid rate, with total industry spend growing at a CAGR of 5.4% from 2013-22 to reach USD ~45 billion. And with this rise in demand, we have seen a proliferation of data service companies, a diversification of distribution models, and the emergence of specialised data vendors.
While data providers can directly distribute and commercialise their data, most rely heavily on a small suite of global data vendors, with 83% of global market data revenue captured by data vendors in 2022.
Such dependency can reduce the velocity at which data providers can launch new products, restrict their ability to innovate, and increase the risk of non-compliance. And while some data providers have acquired data vendors to vertically integrate across the market data value chain, this has come at a high cost.
We believe cloud adoption offers a more attractive proposition for data providers to capture monetisation opportunities across the market data value chain, allowing them to (1) move away from an overreliance on the vendors, (2) reclaim control over data commercialisation, (3) foster innovation, and (4) streamline operations.
A number of data providers (e.g. exchanges) are already forming strategic relationships with the major cloud providers, notably Nasdaq with Amazon Web Services, LSEG with Microsoft Azure, and CME group with Google Cloud.
With the help of cloud technology, we see data providers reclaiming a greater share of global market data revenue, increasing from 16.6% in 2022 to 28.8% by 2025.
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