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Opinion | As Hong Kong looks to regain financial crown, HKEX can win big with data
- From Nasdaq to the LSE, data is no longer a business by-product but an asset that can power the next generation of global capital markets
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Stock exchanges traditionally derive much of their value from initial public offerings (IPOs) and market trading activities. Hong Kong’s, the third largest stock market in Asia and a superconnector between the East and the West, is no different.
Under its operator, Hong Kong Exchanges and Clearing (HKEX), the stock market has a capitalisation of nearly US$4 trillion and last year, HKEX reported a revenue of over US$2 billion.
By all standards, HKEX is a world-class exchange operator. Looking more internationally, however, is there greater value to be created? Is there a bigger opportunity? Looking at other global exchanges’ revenue streams, the answer would appear to be a resounding yes.
The opportunity for all exchange operators, including HKEX, is to graduate from an intermediary that merely facilitates trading and listings, to becoming a provider of solutions in high-value market data.
Nasdaq Inc, for example, is evolving its business to include data innovation. In 2021, it announced a multi-year partnership with Amazon Web Services to build the next generation of cloud-enabled infrastructure for the world’s capital markets. It has also made forays into the rapidly growing market of regulatory technology – or regtech – as companies wake up to the massive data needs of modern financial compliance.
The London Stock Exchange Group has already made the transition: today, it derives under 4 per cent of its annual revenues from listing and trading activities – most of its earnings come from its data and analytics businesses.
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