This article appeared on BestExecution.net on January 23, 2018

Why has the provision of data services become so important for ICE?

The formation of the data business ICE Data Services has been a natural evolution for ICE since we started in 2000 as an electronic trading venue. As electronic trading has increased, so too has the generation of data, which is required not only for trading but also to manage risk. If you think about NYSE, it began with traders sharing bid/offer spreads with each other on a trading floor. Today, and this is a globalised trend, there are now a variety of participants who interact with market infrastructure electronically through the use of different models to calibrate trading strategies, and this has resulted in a greater need across the market for more types of data and sophisticated analytics.

Over the past two years, the company has made a significant number acquisitions*. What has been the strategy behind these?

"We are always looking for opportunities and the ability to create new services and products, whether we bolt them on or build them in-house."

The driver is usually that there is a gap in our customer offering and we buy an asset that fills that gap in order to offer a more fulsome service. However, before we make an acquisition, we debate as to whether it is better to buy or build the service. For example, we recently launched a new exchange-traded derivatives reference data service that was built from our strong position as a global operator of derivatives exchanges combined with our established reference data business. In that case it made more sense to build than buy. In situations where it has made more sense to buy, I would characterise the acquisitions that we’ve made over the past few years as mainly bolt-ons, where we believed buying the business would help us get the product or service to market much quicker than if we’d built them ourselves.

Although I realise it is hard to characterise Interactive Data (bought for $5.2bn in 2015) as a bolt-on acquisition because of its size, the fundamental drivers were the same in that we wanted to expand our independent valuation business. We knew it would complement our existing suite of data services especially in credit, where we have the largest clearinghouse, as well as our ETF business. It also gave us an opportunity to look at fixed income where we want to continue to add transparency.

What have been the challenges in integrating the different businesses from an organisational and cultural perspective?

We tend to move very quickly in terms of integration and I think we do it well because we have had a lot of experience in complex integrations. The first thing we do is to approach the integration with the premise that the ICE culture, where people are hardworking, entrepreneurial, nimble and eager to learn, will be the pervading one. We realise that our culture is not for everyone, but we have been able to retain the key talent in all the acquisitions that we have made. Additionally, we are very focused on providing services that customers ask for in the manner that they ask for them. Our management style is also different from many other companies in that we are very hands on. Our management team gets ‘in the weeds’ with the business which gives us a better understanding of the details of the business and this in turn helps to develop the overall strategy.

How are you developing ICE Connect, which you started to roll out as a beta version in the second quarter of 2017?

ICE Connect is a story of many years in the making and one that started with WebICE, which is our electronic trading platform, and the evolution of our proprietary instant messaging service, ICE Instant Messaging, which we acquired in 2008. We’ve brought these two applications together with our ICE Options Analytics and recently expanded Data & Analytics application to deliver a single offering for our desktop tools that leverages data more effectively. In many ways ICE Connect is the final leg of the stool of services in that it consolidates our offerings, and with a single sign-in, clients can access instant messaging, order execution, price discovery, market data and analytics, and historical charts.

In terms of infrastructure, I read, and we have talked previously, about the firm maintaining different infrastructure and latency profiles – what is the strategy behind that?

If you look at the make-up of the marketplace, there is the full spectrum of users with different trading strategies. For example, high frequency traders and market makers will have a different latency requirement than institutional investors who are price takers. There may also be the commercial firms who are looking to hedge certain exposures. We wanted to ensure that we provide the full suite that encompasses all latency profiles in order to properly service our global customer base.

Looking ahead, are you planning further acquisitions and what gaps need to be filled?

We are always looking for opportunities and the ability to create new services and products, whether we bolt them on or build them in-house. The biggest drivers continue to be around regulatory ions, whether it be in the US with the new liquidity rules or in Europe where there is MiFID II as well as PRIIPs rules (Packaged Retail Insurance-based Investment Products). They all come into effect between 2018 and 2020 and we believe they will all require new compliance and data requirements for our customers.

I can see there are plenty of opportunities but what are the challenges?

I think exchanges have dealt with more change in the past 15 to 20 years than in previous periods. This is in terms of the types of trader profile, complexity of their strategy and preciseness of risk management. The fact is that technology and data are complimentary offerings to market, and the challenge is to continue to ensure that the new services you are providing are those that are relevant to clients as their risk management needs continue to evolve.

*Acquisitions such as SuperDerivatives, Interactive Data, S&P Capital IQ’s evaluated pricing and terms & conditions business, CMA (Credit Market Analysis), TMX and most recently Bank of America Merrill Lynch Global Research division’s fixed income index platform.

Lynn Martin is President and COO of ICE Data Services, responsible for managing global data operations including exchange data, pricing and analytics, reference data, desktops and connectivity services that cover all major asset classes. She began her career at IBM in their Global Services organisation where she served in a variety of functions, predominately as a project manager within the financial services practice. Martin joined NYSE Euronext in 2001 and has served in a number of leadership roles, including CEO of NYSE Liffe US and CEO of New York Portfolio Clearing. She most recently served as COO of ICE Clear US. Martin holds a BS in Computer Science from Manhattan College and a MA in Statistics from Columbia University.