First, as Reb Natale reports, banks like Goldman Sachs, Morgan Stanley, JP Morgan, Deutsche Bank and many others are very much on the lookout for engineers with open-source programming skills. And as Max Bowie writes, as market data (and by extension, alternative data) becomes ever-more complex and valuable for areas such as data science, the use of APIs is growing rapidly. (More on that below, actually.)

These two trends—increased API usage as a data delivery mechanism and the use of open-source tools—weave nicely with others that are changing and re-shaping the industry, specifically public cloud usage, interoperability projects, and the continued development of artificially intelligent tools.

Now let’s get into a subject that ties together all of the above—alternative data.

Exchanges & alt data: A changing marketplace

Not that people care how the sausage is made, but tech reporters generally generate story ideas four different ways: they talk with someone at a company about a cool new project they’re working on; they get a tip (usually from a competitor or former employee) about allegedly shady behaviors at a company; they read something that stands out in a public (or obtain a non-public) document; or, more nebulous, they develop a theory based on loose threads of information that they try and tie together.

Let’s drill into that last one. We had a theory that Nasdaq was winding down Quandl, the alternative data marketplace the exchange acquired in December 2018.

The theory was born a few months ago. I was interviewing a competitor, and they were talking some shit about Quandl. This is par for the course, and 99% of the time, such talk is not worth repeating. I asked around, but nothing was there.

Then we noticed that Quandl founder and CEO Tammer Kamel “retired from Nasdaq” in April and is seeking new opportunities. Cofounder Abraham Thomas also appears to have left. A quick search of LinkedIn shows that a few others have left the vendor over the last 18 months. And Michael Cornacchia was moved over (job title, anyways) from Quandl to a new business unit, Nasdaq Data Link.

The comings and goings of a company’s staff aren’t particularly odd or necessarily interesting, as founders and employees of acquired companies will often stay on for a pre-determined, agreed-upon period of time to ensure a smooth transition. But then we noticed that Quandl had stopped sending out its weekly newsletter in July. Put together, we smelled some smoke—at least enough to ask if anyone else did, too.

After talking with a few current and former employees, and following Nasdaq’s product announcement last week, it would appear our theory was quite wrong. (Which is usually the case…theorizing truly exclusive news is not easy.)

As Max Bowie noted in his story about increased API usage, Nasdaq last week unveiled a new offering, dubbed Data Fabric. The managed service provides access to its Data Link marketplace, which includes Nasdaq proprietary market data, public datasets that is scrapes from the web, and alternative datasets via “the former Quandl platform,” delivered via a single API. From the story:

Bill Dague, head of alternative data at Nasdaq, says users will find the ease of browsing and accessing these datasets “very reminiscent of the Quandl experience.” After acquiring Quandl, Nasdaq kept the vendor’s ethos of making market and economic data easier to use, allowing clients to find and display data within minutes, and to access it easily via a Rest API.

“That informed our thinking when we did the acquisition,” Dague says. “Part of the acquisition plan from the beginning was to take that experience and technology to the Nasdaq level. With the launch of Data Link, we’ve elevated that… and over time, will make all Nasdaq data available through that Rest API.”

That article explains the full thinking of Data Fabric and how the exchange eventually hopes to roll out a service that will allow users to distribute their own proprietary data throughout their organizations. (Nasdaq already has a prototype in place.)

When Nasdaq bought Quandl, it looked at the time as though the exchange was acquiring a popular alt data provider—a marketplace, rather than a niche data vendor. But listening to Dague, it sounds like Nasdaq was all along after the underlying technology (and the people who built it), and that they saw it could be greater than it was. Again, look at that quote from the story: “Part of the acquisition plan from the beginning was to take that experience and technology to the Nasdaq level.”

LSEG acquired Refinitiv, and the latter has since shifted its focus. A fair while back, ICE acquired Interactive Data and several other data outlets, and then bonded those pieces together. Cboe acquired Hanweck and FT Options to bolster their research capabilities. CME has partnered with Google, which could lead to new and interesting data plays.

None of these are apples-to-apples comparisons with Nasdaq/Quandl, but I think these different moves do show that exchanges are actively changing the nature of their businesses. As Max put it to me, in this new world, the actual exchange trading business could become the table stakes that support the more profitable new data services ventures from these market centers.

As I mentioned at the top, there are a few trends unfolding in the capital markets to watch. Front and center is this shift to the public cloud. While the CME-Google pairing made waves, Nasdaq has also been vocal in its support of shifting more workloads to the cloud.

As I understand it (and tell me if I’m wrong), this has led to the rise of as-a-service offerings, which has led to the rise of managed services. Why build when you can easily buy and deploy an application? Or, even better, buy then customize.

This all bleeds into the API renaissance (and subsequent challenges). Add to that, as Max explains, an explosion of new datasets available to traders and portfolio managers—not just market and reference data, but alternative data (and that certainly includes ESG data). APIs provide a (potentially) cheaper, better performing, more stable way to ingest and deliver that valuable information.

So now you have cloud, big data, and APIs working together. Next, we throw in AI, and specifically, machine learning. You have all this data, but you need algorithms to help contextualize and find signals in that sea of ones and zeroes—you need to deploy AI to extract insights and augment what a human can accomplish with the naked eye.

In the past, banks and asset managers developed their own proprietary tools to take advantage of these revolutions, but now they’re more likely to buy and/or partner—or perhaps explore open-source avenues to help in their customization efforts. After all, machine learning itself has, in some regards, been democratized thanks to open source (and, of course, cloud).

So you now have a deluge of data and a mind-numbing catalog of as-a-service and open-source tools…how do you get these applications to talk to one another? Enter interoperability projects, such as the FDC3 standard. And lurking in the background is the disruption expected from Big Tech providers who will engulf the financial technology space over the coming years.

But underpinning all of this is data. And while alternative data has always existed in some form or another, the ability to collect, store, and analyze that information is rapidly evolving. This will push exchanges (and, frankly, every other company in every industry under the sun) to re-evaluate how they make money. For Nasdaq, it’s in the world of managed services and creating something that trading firms can use to distribute their own data—the Quandl marketplace, just on steroids.

Or…maybe this is all just a theory. Think I’m wrong, let me know: anthony.malakian@infopro-digital.com.

The image above is “Cordelia Parting from her Sisters” by Ford Madox Brown, courtesy of the Cleveland Museum of Art’s open-access program.