DataBP: Reclaiming the Market Data Value Chain

The demand for financial market data is increasing at a rapid rate, with total industry spending growing at a robust CAGR of 5.4% since 2013, reaching ~USD 45 billion by the end of 2022. And with this rise in demand, we have seen a proliferation of service companies, a diversification of distribution models, and the emergence of specialised data vendors.

Traditionally, data providers would distribute their data directly to customers or, more commonly, rely on a suite of global data vendors. While data providers maintain direct distribution arrangements with their most significant clients, the lion’s share of global market data revenue (i.e. 83%) is captured by vendors. Both the direct distribution and indirect distribution models have distinct benefits and limitations. Direct distribution offers greater flexibility, along with a reduced time-to-market, but can create a highly fragmented consumer experience. In contrast, indirect distribution offers the convenience of a single feed of data but often in bundled data sets that lack flexibility. The dependency on data vendors can also reduce the velocity at which data providers can launch new products, restricting their ability to innovate and diversify, whilst also increasing the risk of non-compliance. In some cases, data providers have acquired data vendors to bridge the gaps, but this comes at a high cost.

We believe cloud presents an opportunity to deliver the best of both worlds.

Public cloud adoption provides greater distribution and commercial flexibility and a chance to hit reset on the end-user relationship with modern distribution models. It enables more direct distribution capabilities, providing total flexibility in product creation, along with more dynamic packaging and more responsive control. Cloud can also offer additional advantages such as operational efficiencies, infrastructure modernisation, and scalability. The increasing relevance of A.I. and the appetite to improve intellectual property (“IP”) protection through
strategies such as digital rights management further underscore the opportunities presented by cloud technologies.

The potential of this new approach reduces the barriers to entry for smaller and alternative data vendors, activating the ‘long-tail’ of providers through a cloud-based management framework that replaces the legacy ‘trust’ model with automation and technology, whilst reducing exposure to the traditional operational and commercial risks of operating as a vendor.

In this report, we analyze the above trends in detail, whilst also exploring some of the additional capabilities required by data providers as they navigate the possibilities created by cloud distribution, as well as examine how incumbent business models are evolving in an effort to capture the opportunities presented by the evolution of market data delivery. Read the full report! 

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