How does NASDAQ make money?
How much of it is from selling market data, and how much of it is from commissions from trades?
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Sign up to join this communityCompanies with more than $10M in assets and a share class with more than 500 equity owners are required by the SEC to file an annual Form 10-K report.
You can reverse engineer how NASDAQ makes its revenues through their latest Form 10-K. After deducting expenses from transaction rebates, brokerage, clearance and exchange fees, this is the breakdown:
Market services, 41.0%. This includes:
Listing services, 12.0%
Information services, 23.3%. This includes:
Technology solutions: 23.7%
I want to emphasize a related point: HFT firms that use proprietary feeds and colocation services have been receiving a lot of media flak for untrue reasons. The Nanex and Flash Boys rhetoric is colorful, but poorly researched.
As you can see for yourself, exchanges run a huge business and the proprietary feeds and colocation services are only a very small part of the pie. Moreover, even among the users of colocation services and proprietary feeds, the biggest clients are actually the software vendors (Interactive Data, Reuters, Bloomberg) and broker-dealers.
And besides, HFT firms are middlemen by design. That's like complaining that Arrow Electronics and Ingram Micro can buy millions of Intel processors at the lowest prices, and that retail consumers like you and me can't compete with them. Well yes, but you and I can buy an Intel processor from Amazon for a very low price, with excellent warranty and replacement services at only several dollars more than Arrow/Ingram are paying per piece.