In recent years, the financial data and markets infrastructure (FDMI) sector has emerged as a powerhouse within the financial services industry. This segment, which includes exchanges, trading venues, post-trade services, and data analytics providers, has experienced remarkable growth, outpacing the broader financial services sector. From 2019 to 2023, FDMI companies achieved a compound annual growth rate (CAGR) of 17% in total shareholder return (TSR), significantly higher than the 10% recorded by the overall financial services industry. However, the future presents both opportunities and challenges as new market dynamics reshape the landscape. The rise of Big Tech, the emergence of nonbank market makers, and the rapid adoption of generative AI are just a few factors that will define the next phase of FDMI evolution.
Exploring the Growth and Transformation of FDMI
The FDMI sector has been on an impressive trajectory since 2018, with revenues expanding at an 8% CAGR, reaching over $278 billion by 2023. Trade execution and post-trade services, technology services, and information services form the core verticals driving this growth. Post-trade services, for instance, saw an 8% annual increase, fueled by regulatory emphasis on clearinghouses. Meanwhile, information services grew by 10% annually, driven by the democratization of investment strategies and the rise of new asset classes like private markets and digital assets.
Technology services, particularly regulatory technology (RegTech), also witnessed substantial growth, benefiting from increasing regulatory complexity. However, the sector now faces several disruptions. Big Tech’s expansion into financial infrastructure, slowing buy-side revenue growth, and the rise of nonbank market makers are creating new competitive pressures. Private markets, once a niche area, have become too significant to ignore, while generative AI is accelerating innovation across various applications.
These changes signal an inflection point for FDMI providers. To sustain their growth, companies must adopt a dual strategy: strengthening their core operations while exploring new avenues for value creation. This involves enhancing infrastructure resilience, adopting modern operating models, and investing in emerging ecosystems and private markets.
Implications for the Future of FDMI
From a journalist's perspective, the FDMI sector stands at a critical juncture. The rapid pace of technological advancement, coupled with shifting market dynamics, demands that companies rethink their strategies. While the past decade has been marked by robust growth, the future will require agility and innovation. Providers must not only fortify their existing businesses but also venture into new territories, such as private markets and integrated service ecosystems.
The entry of Big Tech and fintech players adds another layer of complexity, pushing incumbents to deepen their value propositions and forge strategic partnerships. Ultimately, the ability to adapt and innovate will determine which FDMI providers thrive in this evolving landscape. As we move forward, the sector’s resilience and capacity for transformation will shape the future of global financial markets.