Stock Exchanges as Platforms for Data and Trading

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. These findings are relevant to our understanding of competition among stock exchanges, complementarity between market data and trading, and policy questions relating to the pricing of market data.