🇺🇸United States

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

1 verified sources

Definition

Exchanges and trading venues routinely lose entitled market data revenue because downstream firms (brokers, banks, fintechs, vendors) consume and redistribute data beyond what is declared in license reports. Industry analysis notes that the long tail of fintechs and smaller consumers often creates "revenue leakage and licensing compliance issues due to limited administrative discipline" in tracking and reporting usage.[6]

Key Findings

  • Financial Impact: 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.
  • Frequency: Monthly (license reporting cycles and audits reveal recurring gaps)
  • Root Cause: Complex, fragmented entitlement and reporting processes; manual self‑reporting by clients; lack of automated usage metering across terminals, non‑display, derived data, and downstream redistribution, particularly among smaller fintechs and buy‑side firms.[6]

Why This Matters

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

Affected Stakeholders

Exchange market data sales, Exchange market data licensing/compliance teams, Vendor management at banks and brokers, Fintech product managers using exchange data, Market data administrators (MDAs) at client firms

Deep Analysis (Premium)

Financial Impact

$1.2M–$4.8M annually (3–5% of market data spend for active proprietary firms; $300K–$1.2M per firm in underbilled usage) • $2.5M–$7.5M annually (assuming 2–3% underbilling on $250M–$500M market data spend across all consumers served by retail brokers; split across multiple brokers = $500K–$2M per brokerage) • $800K–$3.2M annually (1–2% underbilling on $250M–$500M in asset manager data licenses; $200K–$800K per large asset manager)

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Current Workarounds

Analyst informally compares infrastructure logs and network telemetry to whatever license information they can find in shared folders, then screenshots offending screens from vendor terminals or websites and pastes them into Excel-based case files and email threads, rather than using a structured entitlement vs. usage compliance workflow linked to contracts and billing. • Executive team leans on ad-hoc internal audits and manual triangulation: asking market data, member relations, and surveillance teams to pull disparate reports, sampling a few retail platforms’ public UIs, and reconciling this against outdated spreadsheets and email threads about licensing terms instead of continuous, automated entitlement vs. usage monitoring. • Manual attestation forms (paper or PDF) submitted by asset managers claiming single-user or single-desk usage; Excel-based user access logs maintained locally without exchange visibility; email confirmations of 'no redistribution'

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Methodology & Sources

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

Evidence Sources:

Related Business Risks

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.

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

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]

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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