Enhanced Selection Criteria: New Implications for Market Data Solution Buyers

Among the many transformational changes born out of the post-global financial crisis (GFC) era is the relationship between buyers and sellers of market data and related infrastructure solutions. TABB Group believes that no longer will seemingly benign mismatches – primarily between the largest enterprise ecosystem specialists and smaller buyers from the hedge fund, asset management, Tier 2 banking, and “up-stack” vendor communities – be as tolerable as in the prior era.

Today, movement in the principal factors of functionality, costs, and service are set to influence the re-alignment between what we are calling “solution counterparties”. Moreover, the convergence of these factors is causing something much more fundamental to play out here on the global stage: Chances are that in most cases there is little or limited value proposition remaining for proprietary management of market data and related infrastructure. A bold statement for sure, but for a majority of current trading, investment, and risk analytics strategies, TABB Group believes that market data management is not a significant component of competitive advantage. On top of that, even the simplest applications that use market data have become exceedingly and increasingly complex.

The impact of this hypothesis is becoming a “battle for the middle”. Yes, prop shops and other specialized trading firms will continue to pair up with high-performance, latency-sensitive vendor specialists. And yes, Tier 1 banks, the largest asset managers and premier hedge funds, and other global firms will continue to pair up mainly with enterprise market data ecosystem providers (and supplement with other solution providers for special situations). These are the extremes; the tails of the “solution counterparty” bell curve. However, in the middle is everyone else; both buyers and sellers of market data solutions. And, it is here that we believe there is strong potential for many market data buyers to make new solution provider selections.

In this 18-page, 8-exhibit TABB Group Focus Note, Enhanced Selection Criteria: New Implications for Market Data Solution Buyers, we detail the market data and related infrastructure landscape, the factors and selection criteria that are leading to our proposed re-alignment of buyers and sellers of market data solutions, and then ultimately showcase the specific profiles of those buyers and sellers that are likely to become re-aligned in the post-GFC era.