Index Data: A High-Margin Business, with Room for Disruption?

EXECUTIVE SUMMARY

This report examines the market for index data and related services, such as index administration and calculation. With a long and storied history, the index industry has undergone three key evolutions, namely:

  1. A progression of offerings: The industry moved from a staid, dull business, to one where investors have myriad options to choose from and can be very specific about what they want.
  2. Vertical-to-horizontal transition: The role of the index provider has also evolved. In its early days, the index provider – or even financial institution – handled all aspects of building, maintaining, and distributing an index. though some index providers still do it all, vendors have slowly come to specialize in different parts of the value chain.
  3. Pricing structures have changed: The cost of index data has increased significantly over time due to a variety of factors, including a lack of pricing transparency and complex licensing arrangements.

As such, spending on indices continues to grow at a steady pace. Opimas estimates global spending on indices to reach over US$6.3 billion in 2022, growing at an annual rate of roughly 13% since 2018 (Figure 1).  

 

 Figure 1. Global spending on indices to reach over US$6.3 billion in 2022

 

 

In addition to discussing recent trends within the index industry, this report compares the different vendors active in the space, outlines key M&A deals and partnerships, and offers a discussion of the future of the index business.

A trio of well-known names – FTSE Russell, MSCI, and S&P Dow Jones – each hold around a fifth of the market and have shown their index segments to be highly profitable. This begs the question: is industry disruption possible?

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Mentioned in this report:  BITA, Bloomberg, Cboe, Center for Research in Security Prices (CRSP), Dow Jones Indexes, Euronext, FTSE Russell, ICE, Indxx, JPX Derivatives & Commodities, MarketVector Indexes, MerQube, Morningstar, MSCI, Nasdaq, Parameta Solutions, Qontigo, S&P Global, Shanghai Stock Exchange, Shenzhen Securities Information Co., SIX, Solactive, VettaFi

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