Bloomberg faces an unexpected new threat to its dominance in data from a 300-year-old British firm

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Image: Reuters/Brendan McDermid
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The London Stock Exchange Group (LSE) traces its legacy back to the late 17th century, to a coffee house in the British capital where traders met to discuss prices. Bloomberg was founded in the early 1980s, and made its founder, New York’s former mayor, into a billionaire by packaging up financial market data and selling it to traders through computer terminals that cost about $22,000 a year.

The two companies are now in direct competition, after the London exchange encroached on a big part of Bloomberg’s business: bond market information. This week, the LSE said it’s buying a fixed-income indexes and analytics business from Citigroup for $685 million.

Financial market data is a lucrative business, as Bloomberg knows well. Exchange-traded funds and other assets tied to indexes typically pay fees to use the underlying intellectual property. Bloomberg itself spent around $780 million to buy fixed-income indexes and analytics from Barclays.

The added competition for Bloomberg comes as the company’s core investment-banker customers are ditching their terminals to save money—subscriptions fell slightly last year, down by 3,145 to a little less than 324,500. This was only the second yearly drop in the company’s history, according to the Financial Times (paywall). Also, as computers handle more and more of the trading these days, financial companies need fewer human traders than they used to, which means they need fewer Bloomberg terminals to deliver information to people.

Indexes are one way Bloomberg has sought to diversify. It has made other acquisitions in recent years, such as Dublin-based software provider PolarLake. While terminals remain undeniably central to Bloomberg’s prosperity, overall revenue was estimated to have risen last year, despite the drop in subscriptions. (This reporter previously worked for Bloomberg News.)

The LSE’s pivot into bond-market information, meanwhile, comes amid its own pressures: since Brexit, officials in the EU have targeted the exchange’s clearinghouse, which acts as an intermediary between buyers and sellers of financial instruments, preventing derivative defaults from spinning out of control. They insist that once the UK leaves the bloc, such systemically important euro-denominated operations should remain in the EU, and therefore move out of London.

While LSE has been evolving for centuries, compared with a few decades for Bloomberg, the companies appear to have similar views of the financial industry’s future.