How to Be Strategic in Identifying Cost Savings in Market Data

By Cia Fatemi, Global Head of Sales, Market Data Services, Transaction Network Services 

Market data is one of the most significant expenses for financial institutions, often ranking as one of the largest operational costs. Given the increasing complexity of trading environments and regulatory requirements, firms continuously need to evaluate their data consumption strategies to ensure they are both cost-effective and operationally efficient. However, many firms may be continuing to pay for redundant or underutilized data, missing opportunities to optimize their expenditure.

A more strategic approach to market data cost management can yield significant savings without compromising access to critical information. By leveraging managed services, optimizing hardware refreshes, and conducting regular usage audits, firms can unlock cost efficiencies while maintaining high-performance operations. Additionally, shifting from large capital expenditures to an operational cost model offers firms greater flexibility, scalability, and financial predictability.

The Hidden Costs of Market Data

Market data expenses vary widely across financial institutions, depending on the size of the firm, the number of users, and the range of markets in which they operate. Different exchanges charge different rates for data, with US market data typically carrying a higher cost. However, a common issue among firms is paying for unused or unnecessary data subscriptions. Institutional traders often request access to numerous market data feeds, yet audits frequently reveal they actively use only a fraction of them.

Firms that lack visibility into their data consumption may be at risk of overpaying, potentially by hundreds of thousands of dollars per year. Without a systematic approach to data management, organizations may risk accruing unnecessary costs that can quickly escalate, especially across global teams with large user bases.

Leveraging Managed Services to Optimize Costs

One of the most effective strategies for financial firms looking to reduce market data costs is to transition to a managed services model. Traditionally, firms have maintained their own infrastructure, requiring dedicated teams to manage servers, software updates, compliance tracking, and troubleshooting. This approach demands significant capital investments and ongoing maintenance expenses.

By outsourcing market data management to a provider that offers Market Data as a Service (MDaaS), firms can reduce internal resource burdens while benefiting from more cost-efficient solutions. Managed services providers offer consolidated access to data which ensures that firms only pay for the feeds they need. They also offer expert oversight, which can help firms comply with data usage policies while reducing unnecessary expenses.

The Role of Hardware Refresh Optimization

Market data infrastructure requires continuous upgrades to keep pace with trading demands. Historically, firms have handled these upgrades through periodic hardware refresh cycles, often involving multi-million-dollar capital expenditures. However, this traditional model presents financial and operational challenges, as hardware investments must be forecasted years in advance which may limit a firm’s flexibility.

An alternative approach is to shift from a capital expenditure model to an operational expenditure model. Instead of purchasing servers outright, firms can opt for a subscription-based model where they pay a fixed monthly fee for infrastructure management. This approach spreads costs over time because it avoids large upfront expenditure and allows firms to scale their infrastructure as needed.

By partnering with a provider that offers infrastructure-as-a-service, firms can avoid costly overprovisioning while ensuring they have access to the latest technology without disruptive, large-scale migrations. Additionally, outsourcing infrastructure maintenance may reduce the need for in-house expertise, which can lower overall operational costs.

Conducting Usage Audits for Maximum Efficiency

Financial firms often accumulate market data subscriptions over time without reassessing their alignment with actual usage. Establishing a habit of regular audits helps identify cost-saving opportunities and ensures firms only pay for the data they truly need.

A comprehensive usage audit involves analyzing data consumption patterns, reviewing exchange fee structures, and identifying redundant or underutilized feeds. By implementing tools that monitor market data usage in real time, firms can gain greater transparency into their data needs and make more informed decisions about which subscriptions to maintain or eliminate.

Advanced market data monitoring solutions use real-time tracking to help firms evaluate data usage – identifying what is being used, how often, and by whom. By aligning actual consumption with licensing and subscription costs, firms can reduce wasteful spending while ensuring that traders and analysts have the data they need. These solutions deliver month-over-month insights into data consumption, allowing firms to optimize costs and adapt dynamically to evolving business needs.

The Future of Market Data Cost Optimization

As financial markets evolve, so must firms’ approach to market data cost management. The industry is shifting toward agile, subscription-based models that enable firms to adjust their data consumption dynamically in response to real-time needs.

By adopting a strategic approach – leveraging managed services, optimizing hardware refresh cycles, and conducting regular audits – firms can not only potentially achieve significant cost savings but also enhance operational flexibility. These strategies help to ensure that market data remains an asset rather than a financial burden, allowing institutions to reinvest savings in core business functions, innovation, and competitive growth.