Opening Cross: Tipping My Hat to the New Constitution

There’s a new revolution quietly underway in the market data industry. It’s not “Out with the old, in with the new,” but rather “In with new ways of doing old things,” much as the auto industry hasn’t invented flying Deloreans, but has stepped up investment in hybrid and electric vehicles. The key issues haven’t changed: we still need to get from A to B, we just want to do it better and cheaper with less impact.

Likewise, in the market data industry, the key challenges haven’t changed: Tight budgets? Check. Admin and licensing worries? Check. Need ever-better content? Check. New market structures? Check. And to address these issues in the modern age, people realize that they don’t need to reinvent the wheel, but can make wheels work better by updating the brakes, suspension and steering.

For example, in this week’s issue, we detail how Tick Data Corp is expanding its content from exchange-traded equities and derivatives historical tick data to over-the-counter foreign exchange tick data, reflecting a growing need for greater volumes of historical data for back-testing. An old idea, but taken to a new space.

Similarly, startup Estimize, which last week launched an earnings calendar of financial results, ranked by a company’s “popularity” among estimates contributors, is taking a new approach to the long-established earnings estimates business by crowd-sourcing estimates from individuals and buy-side firms, including hedge funds, asset managers, corporate finance professionals and independent analysts. Founder Leigh Drogen claims that—as the service attracts more contributors—its consensus estimates are proving more accurate than the consensus from Wall Street analysts. There are precedents for this approach, such as CMA, which began creating evaluated fixed income prices by polling buy-side firms based on what they would pay for an asset, rather than based on dealer estimates.

Elsewhere in this issue, we feature a Q&A with industry veteran Emilio Mercado about his startup, Simplified Financial Information, which is taking a new approach to usage monitoring to support cost control initiatives by looking at real-time network traffic to consumers, rather than relying on inventory systems that need to be updated manually.

Meanwhile, Interactive Data is beefing up the charting in the web-based version of its FutureSource data display to bring it in line with that of its thick-client desktop, partly in response to demand from smaller firms without the IT resources to support large traditional deployments in-house, but also because IDC believes this will prove to be the preferred way of delivering and receiving data in future for vendors and users alike. Thomson Reuters is already taking this approach with its Eikon workstation, while S&P Capital IQ has spent a year revamping its interface into a next-generation workflow tool. The question is whether all vendors will ultimately follow suit, or whether we’ll see a split between traditional and new data displays—and which will ultimately succeed.

This isn’t the only area with the potential for displacing older incumbents: Markit’s Open Federated Chat messaging initiative—a potential alternative to Bloomberg’s ubiquitous instant messaging function in the wake of privacy concerns following the scandal of Bloomberg journalists accessing terminal users’ activity—appears to be gathering steam, with more banks signing up as partners and in talks to participate. And while the initiative’s main thrust is just to target messaging, some say that breaking Bloomberg’s grip on this space could be a stepping stone towards replacing the vendor’s Professional terminal with cheaper alternatives.

This new revolution leaves me (with apologies to The Who’s Pete Townshend) smiling at the change all around. Because with new market structures, more transparency, and additional content and tools at our disposal, it should be much easier for the markets to eliminate restrictive costs and avoid situations similar to that which preempted the credit crunch. In short, at least in theory, this all means we won’t get fooled again.