U.S. Exchange Market Data Fees: More than Meets the Eye

U.S. exchanges won a legal battle on market data fees with the SEC on Friday, ending (or perhaps prolonging) a long-running dispute on the regulation of fee increases by exchanges. The pricing of equity market data has been a contentious issue for the financial industry, with end users such as broker dealers, market makers and institutional investors promulgating exchanges of overcharging for access to certain market data products.

But how much money do US exchanges make selling market data? Short answer: Not as much as you would expect. And even more surprising, most market data revenues come from asset types other than U.S. equities.

The Size of the U.S. Exchange Market Data Pie

U.S. exchanges earned more than $1.9 billion from market data sales in 2019, including revenues from equity, fixed income, foreign exchange and futures data products. Equity market data revenues (including SIP and proprietary market data revenues but excluding reference data products) totaled $709.7 million, with U.S. options data revenues totaling another $125.4 million. And the fast-growing fixed income segment saw revenues of $59.0 million. But U.S. exchanges earn the lion’s share of their market data revenues from futures products, with revenues from futures data sales totaling $816.6 million in 2019 and accounting for 41.4% of total market data revenues.

Long-Term Growth Trends

Given the attention on exchange fees for equity market data, one would expect revenues in the segment to report substantial growth trends. However, revenues in the segment have seen a compound annual growth rate of just 3.9% since 2014, as compared to the CAGR of 7.4% in futures and 34.4% for fixed income products.

The one-year growth trends are even more telling with U.S. equities revenues growing at 1.1%, with U.S. options and fixed increasing by 14.0% and 148.3%, respectively. Futures revenues increased at a more modest pace, rising 3.2% since 2018.

A number of factors are behind the variation in growth rates, including a decline in the number of equity market participants and fast-growing demand from futures market participants both in the U.S. and abroad.  Continued growth in demand for fixed income market data is a given, as demand for fixed income exposure continues to rise and the segment continues along a path of automated trading.

Our report, Information Services Strategies of U.S. Exchange Holding Companies provides an in-depth analysis of U.S. exchange information services revenues by holding company, focusing on the market data and feeds segments of their businesses. The report also includes an analysis of exchange market data revenues by asset type including U.S. equity (SIP vs. Proprietary); International Equity; U.S. Options (OPRA vs. proprietary); futures (U.S. vs. International), and fixed income products. For more information on the report please click here.

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