NYSE turns to social media

There are chances of a market data arms race among major exchanges in the coming years as exchanges try to diversify away from volume-based business segments.

By Trefis Feb 21, 2013 4:37PM
NYSE Technologies, the technology division of NYSE Euronext (NYX), recently announced an agreement with Social Market Analytics (SMA) that will allow NYSE Technologies to distribute sentiment statistics from SMA's social media monitoring engine to its financial services community.

SMA, with headquarters in Naperville, IL, is a startup founded in 2012. It owns some patent-pending algorithms and screening techniques that claim to provide "actionable intelligence".

Note that this agreement comes on the heels of a larger acquisition of Thomson Reuters' investor relations and public relations business units by NASDAQ (NDAQ) in December 2012. That acquisition helps NASDAQ improve its non-transaction-based revenues in the wake of a slowdown in its trading revenues.


We believe that there is a likelihood of a market data arms race among major exchanges in the coming years, as they try to diversify away from volume-based business segments.


We believe the proximity of these two reports is an indication of an increasing emphasis on the market data business. While increasing demand from investors drives the trend, exchanges are more than willing to oblige -- as they need alternate revenue streams amidst disappointing results in its volume-based businesses such as cash equities.

NASDAQ's deal with Thomson Reuters is part of its effort to diversify operations beyond traditional trading services. The firm seems to be ideally positioned to benefit from this trend, with 22.5% of its stock price already coming from market data ($267 million in revenue for 2012, according to Trefis estimates).


We expect a significant growth in the firm's US market data revenue over the Trefis forecast period - from around $267 million currently to nearly $365 million at the end of 2019.


Nasdaq Number of US ListingsMeanwhile, NYSE Euronext seems to have boarded the bandwagon only recently. Market data accounts for only 15% of their 2012 net revenue. However, Michael Geltzeiler, CFO & Group EVP for NYSE Euronext, suggested at a recent conference that the firm has revamped its market data business and is taking several initiatives; including restructured global market data agreements, increasing prices and launching new data packages/ products.


However, we have yet to see more details on this and maintain modest expectations for NYSE's market data business for now.


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