Market Data: Why pay more?
In 1982 when the Bloomberg terminal arrived it transformed the business of trading. For the first time traders were presented with a consolidated and simplified view of financial instruments like derivatives and more complex markets. It increased efficiency, dramatically improved collaboration, and helped contribute to the massive growth of the financial services industry which we would witness in the years that followed. It was a pioneering and highly successful solution.
But since 2008 there has been a gradual sea change in attitude owed to a number of factors. The financial crisis of course put pressure on all financial institutions to cut costs where they could. Increased regulation has again forced the need to keep more capital on hand and further reduce expenditure where possible. And finally, the rise in HFT or automated trading has lessened the need for this pricey terminal.
But it has been a slow sea change. Everyone has spoken about the ‘death of the terminal’ for years but it’s never really materialised. Trying to tear traders away from the sacred terminal and its engrained chat facility is much more difficult than it sounds because there has always been a certain ‘street cred’ around those who have Bloomberg or Refinitiv and those who don’t. Until now…
The pandemic has created the most volatile market conditions we have ever seen, it has rapidly accelerated the adoption of new technologies and really forced organisations to stop talking and start acting. It may not be all about ‘cutting costs’, because some financial firms are thriving in these markets. But it is absolutely about not wasting money! Why pay more for something when you don’t need to? Across the globe, on all levels from consumer to business it is no longer cool to have the most expensive option. In fact – quite the opposite. ‘V4M’ – that’s what we all want – value for money.
If you look at the entertainment industry, for ages we have been paying Sky £100 a month for access to premium content (or data) and then along comes Netflix at a mere £15 a month with a raft of quality shows and a more flexible engagement model. Amazon Prime is even cheaper. Some people may still subscribe to both but everyone is far more satisfied with the choice they now have. And it is this same concept we are seeing in the market data industry. If another provider can deliver seamless, more flexible access to premium content then why wouldn’t we use it?
Another consideration is that in a competitive trading industry those who can access more accurate, maybe alternative data sets are the ones who will win. The term ‘Seeking Alpha’ has been coined for those who have the ability to ‘beat the market’. If you’re all looking at Bloomberg or Refinitv, the same as an estimated 400,000 users around the world, then what gives you the edge? Until now those ‘hard to find’ data sets are exactly that – hard to find, and often the data providers don’t have the experience or technology in place to seamlessly and securely deliver the data at an enterprise level.
For more niche traders, the concept of paying a minimum of $24k a year for a terminal just doesn’t sit well. Flexible engagement models, where you only pay for the data sets you need, without all of the terminal functionality is far more appealing. And in most cases those niche data providers are higher quality because they focus in one area, sticking to what they know.
There will always be a place for Bloomberg & Refinitiv and in fact, Bloomberg have reportedly seen a rise in demand due to the pandemic, but the market data industry is vast, one of the most valuable markets in the world, and the money spent on it is growing every year. For the first time enterprises have access to, and the appetite to, work with smaller, lesser known firms. Those who deliver a high-quality product with a much lower price tag. Step aside big boys – we’re coming through!