Exchanges and Market Data - How Much Money Is Being Made?

Executive Summary

The profits that exchanges generate from market data have come under intense scrutiny in recent years, with broker-dealers and asset managers complaining bitterly about what they consider to be exorbitant, monopolistic fees. Exchanges counter that their fees are reasonable and subject to competitive price pressure. This report does not seek to settle this debate, but to provide information on the level of revenues that individual exchanges are generating from market data, what the profitability of this business is, and how this has changed over the past decade or more.

What appears to be a simple task – determining market data revenues and their growth, quickly becomes quite involved. There have been countless mergers amongst exchanges; the delivery and usage of data has changed considerably, and trading volumes have shifted.

Exchanges have seen significant growth in their information services revenues, increasing from just over US$1 billion in 2005 to over US$6 billion in 2019. This is in stark contrast to major investment banks, who have seen their revenues shrink over the past decade.

The profitability of market data at exchanges is impressively high, and we estimate that exchanges are able to achieve an average operating margin of 76% in this line of business, significantly higher than the rest of their activities. More tellingly, exchanges’ profit margins are more than twice as high as market data vendors such as Bloomberg or Refinitiv, and more than three times as high as major investment banks.

In the United States and the European Union, regulators are increasingly taking note of exchanges and market data revenues and are preparing significant changes to regulation and market structure that will see exchanges’ market data revenues come under pressure.

Figure 1. Exchanges’ Revenues from Data Explodes

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