23 Oct 2018 Surging Trading Volumes Propels Exchange Industry Revenues to Record $16.9 Billion in H118; Regulatory Focus Remains on Market Data Fees

Global exchange industry revenue surged in the first half of 2018, totaling $16.9 billion in the period and are on pace to set an annual record. Trading revenues jumped 17.2%, as strength in global trading volumes propelled the segment’s revenues to $10.7 billion. Information Services (including market data, index and reference data) added $3.2 billion to the total, followed by the Listings & Issuer Services segment which accounted for $1.4 billion during the period.

Industry Sees Growth Across All Business Segments

Global exchanges saw growth across all segments in the first half of 2018 with Trading, Clearing & Settlement revenues leading in year-over-year period growth. Exchange’s diversification efforts continue to drive revenue growth, with the near-term results most evident in the Information Services and Other Business Activities segments, with growth rates of 13.1% and 30.7% in H118 over the year-earlier period, respectively. Information Services has the strongest long-term growth, with its 5-year CAGR at 12.8%, mainly due to Intercontinental Exchange’s 2015 acquisition of Interactive Data Corporation as well as London Stock Exchange and Nasdaq’s focus on expanding into the index segment through their acquisitions of index properties from Russell Investments and Dorsey Wright, respectively.

Regulatory Focus on Market Data Services

The Securities and Exchange Commission’s focus on improving market structure has transitioned to the market data realm, with the effort gaining steam as a result of Brett Redfearn’s appointment as the Director of its Division of Trading and Markets. On October 16, 2018, the Securities and Exchange Commission ruled that NYSE (owned by Intercontinental Exchange) and Nasdaq failed to meet their burden to demonstrate that certain market data fees “are fair and reasonable and not unreasonably discriminatory.” With increased regulatory scrutiny and debate over market data fees, the focus on these fees will be one to keep an eye on in the Exchange Industry into 2019 and beyond.

Market Data Fees Are Only a Part of the Story for Exchange Information Services

Burton-Taylor defines the Information Services segment for Exchanges to include revenue for proprietary market data, SIP data (for U.S. Exchanges), reference and analytics data and index-related services. While the Information Services segment accounts for a growing share of total exchange revenue in recent years, it is primarily a result of M&A activity as well as index and reference data revenues that is driving this segment’s growth. In 2013, the Information Services segment accounted for 13.4% of total exchange industry revenue compared to 19.1% in the first half of 2018.

For example, Intercontinental Exchange’s Pricing and Analytics revenues grew 7.5% in H118 compared to H117. Meanwhile, ICE’s Exchange Data (including NYSE real-time proprietary data and revenue allocated from the SIP) revenues only grew 2.5% in the same period. Additionally, ICE reported that less than 4% of their Data & Listings revenue comes from real-time proprietary market data fees. Nasdaq has leveraged the growth of its index business and its 2017 acquisition of investment data and analytics provider, eVestment, to drive the revenue increase in its Information Services segment.

2018 Half-Year Exchange Market Sizing & Segmentation Report

Burton-Taylor International Consulting is proud to announce today’s publication of the Exchange Global Share & Segment Sizing – H1 report analyzing the first-half of this year in the Global Exchange Industry. The report delivers a comprehensive analysis of current and historical exchange share, demand segmentation and demographics. For more information on this report, please click here.

David Tabaka is an Analyst at Burton-Taylor International Consulting, part of TP ICAP group, where he is responsible for research, analysis and report generation covering Exchange Operators and Index Providers.

Andy Nybo is a Director at Burton-Taylor International Consulting, part of TP ICAP group, where he is responsible for its Exchange vertical, focusing on how competitive pressures are forcing shifts in business models and strategic initiatives of exchanges.