Charles Li

The Hong Kong Exchange’s $37 billion offer to buy the London Stock Exchange Group highlights the exchange’s desire to build out its data business, which makes up only a small portion of its revenue compared with its peers.
Even though HKEX runs on an operating margin of over 70%, market data fees represent only a small percentage of its revenue.
LSE’s information services business, meanwhile, is its largest, making up nearly half of the London-based exchange’s revenue.
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Selling data is big business for exchanges, and the Hong Kong Exchange wants in on the party.

Despite seeing a record 26% increase in profits in 2018, HKEX continues to miss out on a major part of most exchanges’ business models: selling data. But the trading venue’s $37 billion bid to acquire the London Stock Exchange Group, or LSE, on Wednesday shows how it’s looking to go all in on selling information.

“I think it is really a transaction focused on the data side of things,” Octavio Marenzi, the CEO of the consultancy Opimas, told Business Insider, noting the exchange’s desire to expand its footprint in the market.

HKEX has proved to be a unique case in the world of exchanges, as it has managed to operate on an incredibly high profit margin despite not relying on data as a major part of its business.

HKEX’s profit margin in 2018 was north of 70%, compared with 60% for exchanges on average, according to a report from Opimas.

Read more: The Hong Kong Exchange’s bid for the LSE would thwart the London Firm’s $27 billion Refinitiv deal. Here’s why that’s a ‘nonstarter.’

As profits from trading have slimmed considerably in recent years because of innovative new technology and volume moving to alternative trading systems, exchanges have started to lean heavily …read more

Source:: Business Insider


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