Market participants foresee the continuing diversification and expansion of the scope of products and services offered by exchange operators.
Trading platform operators including NYSE Euronext, Nasdaq OMX, CME Group and the Singapore Exchange are each looking to expand their businesses out of the core of just matching orders and into technology and other services.
“If you look at what exchanges are doing, providing different facilities, one-stop shop services, it is allowing traders to get their quotes and trading done all in one place,” said Keith Ross, chief executive officer of PDQ ATS.
The Singapore Exchange announced that it is planning to invest in new post-trade services as it looks to expand beyond domestic equities. The move for expansion comes amid speculation that the SGX is linking up with the London Stock Exchange to make a joint bid for the London Metal Exchange.
U.S. exchange operator Direct Edge recently announced that it had teamed with service provide Xignite to offer historical market data to customers. Exchanges have needed to adjust to an ever-changing environment, with some adapting better and quicker than others. There is increasing sentiment in the industry that the business of running an exchange and matching orders has reached a wall – what was once a lucrative operation has become commoditized.
NYSE Euronext has taken the approach of spinning off all of its technology operations into NYSE Technologies, which is now estimated to be a billion dollar business, accounting for as much as 20% of its revenue. It is providing and running trading technology and infrastructure, in some cases even for competing venues, as well as a suite of advisory services.
Nasdaq acquired technology company Glide Technologies in a move to boost its corporate solutions division. Glide is a provider of corporate communications and reputation management services and software. The company’s operations will be integrated into Nasdaq OMX Corporate Solutions unit, which helps companies manage risk, improve efficiency and increase transparency. Glide will add media monitoring and measurement and content management.
CME Group is set to launch their co-location facility early next year, in what is expected to be a lucrative source of revenue and a key part of its operations going forward. A feature of the facility will be low-latency access to the financial markets in Asia.