Data providers confident that demand from Asia will double
Gavin Blair, The Trade
Demand for market data services in Asia is set to expand rapidly over the next few years, believes Frank Piasecki, the president and co-founder of ACTIV Financial Systems. ACTIV is adding ten new markets in the region to its global data feed coverage this year.
The traditional percentage of Asian revenue within market data companies is approximately 15 to 20%, according to Piasecki.
"By virtue of the conversations we're having, the activity that we hear about, and other feedback, the percentage from Asia will represent at least 30% within the next three or four years. There are huge investment flows that are seeking investment returns and it will find it in places like India, China and Australia," says Piasecki. "Even though there has been some pullback recently, I believe that will flow back."
"As transaction taxes and other regulatory restrictions are being contemplated in Europe, large swathes of the trading community will look for other opportunities, and Asia is the logical destination."
The majority of ACTIV's clients are hedge funds or prop firms from Europe, the U.S. and Asia which seek trading and data services. Piasecki says that interest in the Asian region is getting stronger all the time.
"That community has embedded and learned how to make money in Tokyo, Hong Kong and Singapore, and they see a growing investment interest in developing and emerging markets showing up in the capital market structures in which they want to participate," says Piasecki. "In Asia, there`s a general trend where people have set up shop, dealt with a number of major markets, and now want to take that competency and investment to new horizons."
As exchanges in emerging markets are now fielding technologies to support more electronic trading functions, opportunities are beginning to develop and expand across the region.
He notes however, that firms are far more inclined these days to want to comprehensively test out strategies and markets before making any major commitment to infrastructure investment.
"In Asia, where it's expensive to try strategies, they can experiment without building a huge infrastructure, and if it's profitable, they can continue; if not, they can retreat without a painful infrastructure investment that stares them in the face for a couple of years."
Between April and July, ACTIV has gone online in Bursa Malaysia, the Stock Exchange of Thailand and Thailand Futures Exchange, the Indonesia Stock Exchange and the Philippine Stock Exchange. By the end of the year, coverage is scheduled to include Shanghai Stock Exchange, National Stock Exchange of India, Bombay Exchange and Taiwan Futures Exchange. ACTIV also opened a co-location facility at the newly merged JPX (Japan Exchange Group) in Tokyo.
"The markets we're adding are where we have at least seven or eight firms that have either contracted with us or expressed interest."
The ten new markets in Asia will take ACTIV's coverage to more than 200 equity and derivatives exchanges around the world.
Piasecki concludes that the growing need for ever faster, more reliable and cheaper data feed services shows no sign of slowing down.