Burton-Taylor: Regulation-Driven Data Spend to Grow, But Desktops Threaten Resurgence

Respondents predict industry growth in the region of 1.8 percent, compared to 1.4 percent for last year in the 2017 survey, and are forecasting growth of 1.5 percent for 2019.

Usually, survey respondents display less optimism about current year predictions, and are more bullish about future years, says Douglas Taylor, managing director of Burton-Taylor International Consulting, adding that there is no obvious reason for the drop in optimism for next year. “It could be related to the unpredictability of President Trump and the potential for trade wars. There’s possibly the prospect of less regulation—and since vendors sell a lot of products around regulatory initiatives, that might mean there is less for vendors to do there—though people are generally predicting ongoing growth in regulation,” he says.

Taylor says the survey results show an important distinction between growth being driven by spend being driven by people and desktop terminal positions. For both 2018 and 2019, pricing and reference data received the highest growth forecasts—3.02 percent for 2018 and 2.49 percent for 2019, which is the highest anticipated growth for that segment in the history of the survey, Taylor says. The three product types expected to growth the most in 2018 and 2019 are pricing and reference data, risk management tools, and valuation tools.

However, in a sign that market forces are starting to push back against the influence of regulation on data spend, the three product groups that respondents expressed greater optimism about for next year compared to this year are real-time foreign exchange desktops, real-time fixed income desktops, and research. In fact, combined growth expectations for desktops as a whole—FX, fixed income, commodities, and even equities (which has a much lower growth rate)—far outstrip other areas of spend, such as news or low-latency datafeeds. The growth in fixed income demand being driven by interest rate activity and the development of the fixed income market in China, Taylor says. The anticipated increased growth in these areas come at a come when demand for pricing and reference data, risk and valuations is expected to decrease slightly, he adds.

Regionally, respondents were most optimistic about the potential for growth in China, predicting 4 percent growth in 2018 and 3.6 percent growth in 2019, followed by India with 3.2 percent and 2.8 percent, respectively, and the US with 2.5 percent and 2.1 percent, respectively. At 1.6 percent and 1.2 percent, Western and Eastern Europe’s predicted growth for 2018 is lower than that of 2017, though both regions carried those figures through to next year, bucking the trend of lower optimistic predictions for 2019.

Respondents expect risk managers and hedge funds to deliver the highest growth by user type, with 3.25 percent and 3.2 percent, respectively, followed by investment bankers, reflecting demand for deals-driven data and high levels of M&A activity. Risk managers and hedge funds continue to be the leaders of anticipated growth into 2019, though middle- and back-office users are forecast to narrowly pip investment bankers for third place with 1.5 percent growth (compared to 1.49 for investment bankers)—the highest growth expectation seen for that segment in the history of the survey, Taylor says.

The survey polled a mix of data vendors, data consumers, such as analysts and investors, market data consultants, and others in and around the industry, asking their expectations for growth, excluding the impact of price increases and the effect of currency movements. And though Taylor stresses that this is not a scientific survey, but rather a measure of individuals’ sentiment, he says that over the eight years that the firm has conducted the survey, the results have been generally accurate on direction of growth, and also on relative growth in terms of one sector versus another.