Understand the importance of data providers and how they influence global finance…
In this article, Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023) explains the importance of data providers and how they influence global finance…
What are data providers?
A data provider is an intermediary between data and data users. Indeed, a data provider provides market data to financial firms, traders, and investors. The data distributed is previously gathered, organized and presented in an understandable way. Data providers collect the data from sources such as stock exchange feeds, brokers’ notes and dealer desks or regulatory filings. Some names will definitely ring a bell, such as Bloomberg, Thomson Reuters whereas some others will be less known as Moody’s Analytics.
The different types of data that are exchanged for financial purposes
When it comes to data used in finance, trading rooms are the best example as they contain almost nothing but data. Indeed, transaction prices, traded volumes of stocks and bonds are displayed at all times. But trading rooms are only one specific of example of data’s use in finance.
As mentioned, there are many different types of instruments (e.g., stocks, bonds, currencies, funds, options, futures, etc.) and hundreds of financial markets for investment, which leads to an extremely large flow of data exchanged.
The types of data offered vary by data provider. Generally, they cover information about companies and financial instruments (options, shares, bonds, treasury bonds and currencies) which companies might trade or issue.
The data can be updated every day or several times a day! Intraday data for instance are prices provided throughout the day and are usually released on a continuous basis.
The main dynamics of the Data Providers’ market
The explosion of financial data, enabled by the Internet tremendous potential, caused an explosion of demand for financial data. As evidenced in 2006 by the British mathematician and Tesco marketing mastermind Clive Humby’s quote, “Data is the new oil”, the data providers enjoy a market that seems to be limitless. Indeed, as data provider raw material’s amount is ever-increasing, it appears they will thrive for decades.
In addition, the market seems to be detained by only a few actors among which Bloomberg that acquired BNA and BusinessWeek. This contributes to curbing the number of data providers and improving the monopoly of Bloomberg on the data-providing market. Let’s review the market shares of the 4 major data providers: Bloomberg enjoys a comfortable 33,4% market share, Refinitiv Eiken follows with a 19,6% share of the market, Capital IQ has a 6,2% market share when FactSet closes the ranking with 4,5% of the market. (source:https://www.wallstreetprep.com/knowledge/bloomberg-vs-capital-iq-vs-factset-vs-thomson-reuters-eikon/)
Useful resources
Related posts on the SimTrade blog
▶ Louis DETALLE The importance of data in finance
▶ Louis DETALLE Reuters
▶ Louis DETALLE Bloomberg
About the author
The article was written in March 2022 by Louis DETALLE (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2023).