Last week, after the the Hong Kong Stock exchange did an offer to buy of LSE, I did publish a little post that looked at briefly at where the sector might be heading. There are couple of details that can be added and would surely be useful to understand where the sector is and how is main activity – trading is being challenged by fintech companies. Exchanges have are becoming increasingly dependent on revenues derived from clearing services . It is worth writing down that with the raise of blockchain technology, such services will be challenged. Additionally, exchanges are also increasingly dependent on market data revenue. This is visible on the annual statements of all the leading exchanges globally ( LSE, Euronext, CME, NYSE). Selling market data at the current premium in the future will be more challenging, due to the rise of fintech information services and brokers which would give the same information free of charge. There will be one exception, however and that would be the index business, because of the raise of passive funds. Raising capital is also changing fast. Fintechs are enabling new forms of raising funds at the expense of the traditional exchange houses. IPOs and debt issuance are already competing with things crowdfunding platforms, ICOs, STOs as well as IEOs. In a world where costs are paramount, fintech does have a significant advantage v.s exchanges. I have found a very interesting white paper published by the Swiss Exchange which examines the six most likely scenarios for the near future about the business, a link can be found here. Credit to that report for the post picture. Although, fintech is winning in both productivity and innovation, traditional exchanges are in a good position from regulatory point of view. Not to forget that traditionally exchanges, are the capital gateway for governments and like central banks have particular role in economic and financial policy. Exciting times ahead for sure, changes and great opportunities coming. Personally, would love to see an exchange house acquiring a blockchain fintech, or the other way around that would be an interesting course of events. What is your take on the process? Would love to hear that in the comments.
Boris Grozev is a seasoned fintech executive. Entrepreneur by heart Boris has helped number of businesses to create and implement business development and product enhancement strategies. His advisory work in Emerging and Frontier markets has promoted culture and technology change, fostered innovation and lead to tangible results. He invests in variety of asset classes and shares his experiences from the journey to financial independence. Boris is a fast learner, whose leadership abilities, ambition, stamina, passion to succeed and attitude naturally spread to others helping to achieve common goals.