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The world’s biggest exchanges have reached a collective solution to their biggest problem of recent years — how to make more money beyond their unpredictable core businesses? As public companies, they are under pressure from shareholders to increase profits. But volatility in trading, normally the industry’s lifeblood, has been low for several years. Antitrust regulators have also prevented some mergers aimed at achieving economies of scale in transactional costs, such as the abortive merger of London Stock Exchange Group and Deutsche Börse.
To please shareholders, some leading exchanges have built revenue streams that now match or outstrip charges made purely on transactions. Diversification into clearing and other trading tools such as the provision of data for fixed income or exchange-traded products markets has helped widen income streams.
This approach has helped protect bourses from unpredictable revenues from trading. Data provision, in particular, is a higher-margin product that many hedge funds and banks cannot do without. For some, the name “stock exchange” now barely describes the scope of their business.