Stock Exchanges as Platforms for Data and Trading

Abstract

We study linkages between stock exchanges’ proprietary data sales and trading activity by analyzing the introduction of a new data product, New York Stock Exchange’s Integrated Feed (NYSE IF). Consistent with trading and information on trading being complements, firms that subscribed to NYSE IF increased their share of trading on NYSE. In principle, firms subscribing to NYSE IF could impose a negative externality on non-subscribing firms due to increased information asymmetry. However, consistent with information purchases having a positive network externality due to increased liquidity, non-subscribing firms also increased their share of trading on NYSE.

Keywords: stock exchanges, proprietary market data, platform competition, multi-sided markets, externalities