🇺🇸United States

Innovation and trading capacity constrained by high and rigid data licensing costs

1 verified sources

Definition

Research for European venues concludes that rising market data fees used to offset declining trading revenues "burden market participants with surging costs" and are "stifling growth and innovation" because innovators face restrictive terms and indeterminate financial risk for new data‑driven services.[3] Smaller firms either limit their use of exchange data or abandon products altogether, reducing potential trading and listing activity on those exchanges.

Key Findings

  • Financial Impact: Lost incremental trading, order flow, and listing activity is not precisely quantified, but the report indicates that exchanges have maintained overall equity market revenues despite lower trading volumes by charging higher prices to fewer participants, implying foregone growth in both trading and data revenue.[3]
  • Frequency: Daily (constrained use of data in new products and strategies)
  • Root Cause: Fee structures that escalate sharply with user count, distribution method, or use case; restrictive clauses on data usage; and lack of affordable access tiers for start‑ups and smaller intermediaries.[3]

Why This Matters

This pain point represents a significant opportunity for B2B solutions targeting Securities and Commodity Exchanges.

Affected Stakeholders

Fintech founders and product managers, Buy‑side and sell‑side quant and algo teams, Exchange business development and listings, Regulators concerned with market competitiveness

Deep Analysis (Premium)

Financial Impact

$150,000-$400,000 annually in foregone revenue from abandoned real-time analytics products; 40-60% gross margin loss on data product line due to licensing cost overhead • $200,000-$600,000 annually in suppressed retail user growth; 3-5% lower new account acquisition due to inferior data experience vs. competitors • $300,000-$800,000 in foregone member trading volume; 2-4% annual member attrition to competing venues; loss of broker-dealer order flow due to cost arbitrage

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Current Workarounds

Document member complaints in CRM; escalate to exchange leadership via memo; offer selective fee discounts to high-volume members; maintain informal 'fee negotiation' side agreements with key members • Maintain high data licensing fees as revenue offset for declining trading commissions; limit data access to premium members only; create tiered access hierarchy to extract maximum pricing power from each customer segment • Maintain internal fee waiver tracking via spreadsheet; request ad-hoc exemptions from Euronext for edge cases (academic use, non-profit); monitor regulatory guidance changes manually to identify cost reduction opportunities

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Methodology & Sources

Data collected via OSINT from regulatory filings, industry audits, and verified case studies.

Evidence Sources:

Related Business Risks

Under‑licensed and under‑reported market data usage causing recurring revenue leakage

Low- to mid-single digit % of addressable market data revenue; for a large exchange with $500M+ annual data revenues, this implies several million dollars per year in lost billings.

Overspending on proprietary feeds and connectivity far above cost to provide

For an active broker or trading firm purchasing multiple prop feeds and high‑performance connectivity, this can run into several million dollars per year in avoidable spend compared with cost‑reflective pricing.[4]

Complex fee and licensing structures driving billing disputes and rework

Six‑figure annual internal cost for larger exchanges and major clients due to staff time on corrections, disputes, and legal review; foregone collections or write‑offs from disputed invoices can add further losses.[3][6]

Delayed collections from disputed and manually reconciled market data invoices

For a data business with tens or hundreds of millions in annual billings, even a 15–30 day extension in collection cycles represents material working capital drag, often in the multi‑million‑dollar equivalent of tied‑up cash at any time.

Regulatory challenges and rule changes tied to conflicts of interest in market data sales

Multi‑million‑dollar legal and regulatory engagement costs across major U.S. exchanges over several years, plus revenue risk from mandated changes to data infrastructure and potential fee reductions.[2][9]

Unauthorized redistribution and gray‑market use of exchange market data

For a large exchange, under‑reported and unauthorized usage can represent a low‑single‑digit percentage of total data revenue—potentially several million dollars annually that must be recouped via audits or is never billed.[6]

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