Putting this up late this week. With people away on vacation—and me coming back from my own—it’s been a bit hectic. Anyway, enough excuses, let’s rip into it.

Reimagining data spend

I think that this is a story that many of you will be familiar with: I hated cable TV and welcomed the advent of streaming services and the freedom they provided. I could finally pay for only the channels and services that I cared most about. Flash forward three years, and I have no actual clue as to how much I pay each month/year for the many streaming services that I’m signed up for—and it could very well add up to more than my cable bill ever did.

I was reminded of this while reading this piece by Max Bowie about the market data procurement process. As he explains, several brokers (and even some exchanges) are developing so-called “self-service” data portals. As end-users increasingly want access to larger and more diverse datasets as they expand into new asset classes and geographies, they also want easier access to this necessary trade information. The ideal state for these portals—at least as far as end-users are concerned—is their being able to get the data they need, whenever they need it.

It’s important to note that brokers are being pushed to evolve, though it won’t happen overnight. “We are definitely seeing more of these data marketplaces, but I do feel we are a way off from seeing the true impact,” Bernardo Santiago, founder of market data consultancy S4 Market Data, told Max.

A reason for this slow-burn shift is the lingering question of who gets access to these portals. To my point about losing track of how many streaming services I’m subscribed to and how many channels overlap, end-users face the same dilemma: there will need to be some strict controls in place to prevent these portals becoming a free-for-all with spiraling data costs and little way of tracking usage and spend.

But if nirvana is anyone being able to get the data they need, whenever they need it, do such controls undermine that ideal? If that’s the case, there needs to be a wholesale re-think of how commercial terms and contracts are structured. For example, rather than using a traditional per-person agreement, terms would essentially shift to an all-you-can-eat model. Or, maybe it’s a pay-as-you-go model, where firms assign each user their own set budget, rather than centrally manage what content each user has access to. They can buy what they want within that limitation, but they have to manage their own budget. And once they hit the limit, there’s no “data overdraft”—meaning they can’t buy more packages until their budget is reviewed or refreshed.

And there’s one last potential benefit in this slowly emerging shift: brokers can use these portals to develop “sandboxes” where buy-side firms can experiment with new datasets before signing on, thus allowing users to control costs and mitigate risk. As asset managers continue to add data scientists and machine-learning-proficient engineers, a sandbox via a self-service data-procurement model could be viewed as a game-changer in a world where data is king. And for the brokers, this would create an incredibly sticky product that connects into broader tools and services.

To wrap it all up, these self-service portals could bring about a whole new way of looking at data spend. Think I’m wrong? Let me know: anthony.malakian@infopro-digital.com

CME-Cboe tie-up?

Before I go, I wanted to touch on this CME-Cboe rumor that hit the industry last week. On August 18, the Financial Times reported that “CME Group has approached fellow Chicago exchange company Cboe Global Markets about an all-share deal to acquire the owner of the Vix volatility indices for nearly $16 billion.” The article made note that the CME declined to comment and that Cboe “does not comment on market rumors or speculation.”

So the story hit and Twitter commentators started commentating. But then, soon after the story was published, CME put out this statement: “CME Group denies all rumors that is in conversations to acquire Cboe Global Markets.  The company has not had any discussions with Cboe whatsoever.  While the company does not typically comment on rumor or speculation, today’s inaccurate information required correction.”

Now, this all seemed a bit bizarre to me. Here’s how M&A journalism typically works: A reporter hears a rumor. They see if others have heard that rumor. Once they have at least three reliable sources with knowledge of the talks confirming said rumor, they go to the company for comment. What typically happens from there is one of three things: a spokesperson flatly denies the rumor, and thus the journalist needs to consider whether or not they want to publish; the spokesperson can say “no comment,” with no additional information provided, though if you trust your sources and they say definitively this has happened, you almost view this “no comment” as confirmation, quite frankly; or finally, the spokesperson says “no comment” is the official statement, but then clarifies on background. This is a very simplistic breakdown, but it’s essentially the way this whole thing works.

With a story like this, where there were “three people familiar with the matter,” why wouldn’t the CME just tell the reporters, “no comment,” is the public statement, but on background, “Listen, you got this all wrong—this absolutely did not happen,” or, “Listen, there have not been any official talks about a merger—it’s just people speculating.”? Why just go “no comment” and think that they’d just walk away?

Maybe I’m inclined to believe reporters over corporate executives—and I definitely am—but Phil Stafford has been a standout reporter at the FT for a long time, so I find it hard to believe that he would’ve ignored the CME if they tried to set him straight. But, again, I don’t know…maybe that’s exactly what happened. And there is a lot of pressure on reporters at the major daily papers and newswires to break this sort of news first. It’s why I love working at WatersTechnology—while we do from time to time break M&A news, our main goal is to write the definitive piece about why this deal matters for the industry going forward.

So maybe there was a rush to publish. But if you want my opinion—and this is just that—there were informal talks between a few execs, those execs told some colleagues (in Chicago…people like talking Chicago gossip) and that got fed down to the reporters at the FT.

Finally, the idea of a CME-Cboe tie-up is hardly a new one, though it is certainly intriguing. But I found a few of the numbers in that story odd. Now I am not a “numbers guy”—I failed Intro to Journalism Statistics…twice. But as Max made note to me, the FT said the deal would value Cboe at $150 per share, a 20% premium. But Cboe is already trading at a premium, and its value is only estimated at $2-something billion; $16 billion is more than five times that amount—that’s a helluva premium to pay…and for what? What does Cboe have that CME could want so badly? Or, maybe I have my numbers wrong.That is entirely possible, and if I do, please set me straight. 

Anyway, if this deal does eventually happen, we likely won’t be the ones breaking it, but rest assured, we will spend a few weeks and talk to a few dozen people to better understand what it all means for you.

Got any juicy gossip? Meet me at the White Horse Tavern on Bridge Street, or just fire me an email: anthony.malakian@infopro-digital.com.