As stated the core data consumer universe for an exchange’s market data is finite, but it is not inelastic, there comes a point where it becomes a bad business for a financial institution to continue to trade on a particular market. If price rises for exchange data tips the marginal cost into the red a participant will depart the market. This should be of concern to all market participants because:

1.It pushes the smaller players out of the market first as they cannot compete with resource rich big banks, i.e. JP Morgan, HSBC, Mizuho or Asset Managers, likes of Blackrock, Fidelity and Vanguard. This reduces competition and choice in the market

2.For exchanges, price hikes are becoming counter-productive, one leading exchange raised prices 10% but annual revenue only went up 7%, despite an audit programme as well, indicating data consumers are walking. See above point

The point where an exchange hits the barrier where they cannot grow their price data business is around the +/-15% of total revenues mark. At the moment there are a range of factors built around a core, but not limited to, of 6:

1.Too often there is management pressure to increase revenues quickly, the result is raising fees becomes the ‘Go to First’ strategy

2.Having a price data only business severely limits options especially when saturation point has been reached. The price point pain becomes a focused target for the data consumer

3.Business and pricing models lack transparency or are out of date, they become business inhibitors, rather than business facilitators

4.The number of professional terminal accesses, which still make up the majority of subscription fees (for some exchanges 60%+ of revenues) is not growing. This where price rises tend to hit hardest

5.There is heavy reliance, estimated average +/-65% upon fees either directly from or passed through Bloomberg and Refinitiv

6.Audit programmes have created antagonistic relationships, and are becoming increasingly ineffective, an alternative is required

The largest exchanges have moved beyond the price data only barrier and are more flexible in developing their businesses, however for their smaller peers the challenges are real. MDG believes there are 4 friendly options to constantly raising market data prices.


All businesses should be allowed to grow, banks would complain bitterly if their fees were capped in some way, and they do not subscribe to the data because they love the exchanges. They do so to make money themselves and gain competitive advantages, and quite rightly so.

The questions then become what should exchanges do as an alternative to increasing prices? There are four broad strategies available.

1.Diversify into the data workflow. Exchanges can move from price data along the trading chain to analytics, data processing, trade execution and post trade solutions. This is a model the biggest tier 1 exchanges, Deutsche Börse, ICE, LSEG, NASDAQ and now CBOE are successfully employing, albeit through acquisition, with accompanying costs and integration. This increases margins

2.Expand the data consumer universe. Develop markets move beyond financial institutions into mass digital media catering for a more retail investors. Yes, this is a low margin play. Yes, many exchanges have no business model for this. Yet it is a Moretons v MacDonalds play. As Joseph Stalin once pronounced “Quantity has a quality of its own”. This increases the client base

3.Re-balance the Market Data pricing model. Increase transparency, eliminate ambiguities in policies, make the models understandable and focused upon usage which are clearly articulated. This increases revenue, improves relationships and reduces administration 

4.Finally, the quickest and most easy, get existing clients properly compliant. MDG working with Ian Pearson has found data sources average a minimum of 22% revenue leakage per annum because financial institutions do not have the correct licences. Avoid negative audit programmes (noting they still have a valid place) and focus on positive compliance reviews. Being proactive we have found clients willing to engage and sign up within 4 weeks when done right. This increases revenues, minimises the necessity to raise fees, and creates a regulator friendly level playing field at the same time.

Each of these strategies are not mutually exclusive. They are open to exchanges varying in size from the smallest with more limited resources to the very largest.

Smart exchanges which pivot towards positive strategies can increase revenues, while avoiding backlashes caused by market data price rises.

Keiren Harris 09 May 2023

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