In late April 2017, we noticed a new string of dominoes falling at the fast, automated end of the trading spectrum: With Virtu about to gobble up KCG - not to mention additional consolidations of principal trading groups like RGM Advisors (to DRW), Timber Hill (to Two Sigma) and Chopper Trading (to DRW), among others - it seemed pretty clear that one of the next dominos to fall would be in the direct-feed market data space. The question was: To what degree? (See: "Nasdaq Under Virtu Market Data Axe," April 28, 2017) And yet, when we went back to look - via updating our Nasdaq model - this picture showed up: As Paul Harvey used to say: "...And now the rest of the story..." Obviously this trajectory is the opposite of what was expected. Better yet, in a dictionary somewhere is this chart - at least, of late - next to the words, "fairly smooth sailing" or "strong growth." Over the last few years, data products (and the growth in [...]
A quick math assignment: @Nasdaq earned $540 million in information services (aka - #marketdata) revenue in 2016, up 5.5% over 2015 (and, not to put to fine a point on it, but this growth is slowing as 2015 v. 2014 was +8.2%). @KCGHQ spent $148 million on communications and data processing in 2016. @VirtuFinancial is on its way to acquiring KCG - and is on record with a strategy to ultimately consolidate both operations onto a single, unified trading platform. No doubt, this is not lip service. What is the impact on Nasdaq - and other exchanges - whose revenue growth has become so dependent on market data sales? If you are ambitious, here's some additional intelligence that you could use in the analysis: (We have more in the can if you need it.) BTW, you have to guess that all #HFT leaders have really spiffy axes, no?