Author: Chloe, ChainCatcher
At the beginning of October, ICE announced an investment of up to $2 billion in Polymarket, a move that sent shockwaves through the market. Almost simultaneously, Kalshi also announced a $300 million financing round at a $5 billion valuation. Overnight, the market landscape for prediction platforms was elevated to mainstream finance. Why does ICE need to make this move, transforming a platform that has long been in a gray area into a legitimate forecasting tool? Are the traditional Wall Street exchanges facing an urgent need for transformation?
The Dilemma of the NYSE: Eroding Market Share and Declining Data Business
Looking at the current competitive landscape of U.S. exchanges, the report "US Equity Market Structure Compendium 2024" indicates that the U.S. stock trading market is highly fragmented. The NYSE, under ICE, holds about 19.7% of the trading volume market share, while NASDAQ has a market share of 15.6%. In terms of market capitalization, NASDAQ has surpassed the NYSE. Just from June to September this year, the former has exceeded the latter in market capitalization for four consecutive months, reflecting investors' preference for technology companies.
On the IPO front, NASDAQ has far outpaced the NYSE with 79 traditional IPOs compared to the NYSE's 15, controlling the entry point for emerging companies to go public. Tech startups and growth companies are increasingly choosing NASDAQ, which not only weakens the NYSE's listing fee revenue but, more importantly, deprives the NYSE of future market capitalization and trading volume growth drivers.
If we take a longer view, from 2000 to 2016, the combined market share of the NYSE and NASDAQ plummeted from about 95% to below 30%. This reflects a fundamental shift in the U.S. stock market, where trading is no longer concentrated in mainstream exchanges but has dispersed to smaller exchanges, alternative trading systems (ATS), and multiple dark pools and over-the-counter trading venues.
According to NASDAQ's analysis, the current U.S. stock market has split into three independent markets: traditional exchanges (about 35-40%), dark pools and non-public trading (about 25-30%), and retail and over-the-counter trading (about 30-40%). This fragmentation has led to a disjointed liquidity.
Even if the NYSE tries to maintain its leading position, it faces fierce competition from all sides, not only from NASDAQ but also from emerging exchanges like Cboe, dozens of ATS platforms, and a vast dark pool ecosystem.
In addition, the previously high-margin data services segment is also declining. According to ICE's financial report for the full year 2024 released in February, revenue from exchange data and connectivity services was $230 million in the fourth quarter, a year-on-year decline of 2%. This indicates that the growth of traditional market data services (such as market data and subscription services) has hit a bottleneck, and the market demand for traditional financial data is nearing saturation. However, ICE believes that while traditional market data sales are cooling, there is still a market for customized, high-value indices and analytical tools.
In the face of various challenges, ICE has begun to adjust its NYSE business segment in recent years. In October last year, the SEC approved the NYSE's proposal for spot Bitcoin ETF options, marking a strategic move to capture the derivatives market. Derivatives trading typically generates higher trading fees than spot trading, and with CME long monopolizing the futures market, the NYSE is attempting to carve out a share of the derivatives market by launching ETF options.
Additionally, to strengthen the NYSE's role as a data and index provider, in July this year, ICE not only launched the Elite Tech 100 Index but, more importantly, made the investment in Polymarket, planning to package Polymarket's real-time probability data into financial products to sell to institutional clients.
The Data Behind Prediction Platforms is an Important Material for Financial Products
ICE knows better than anyone: the forward-looking data provided by prediction markets is something traditional financial data cannot offer.
Setting aside the inherent gambler's mentality of humans, the underlying logic of prediction markets is based on the "Wisdom of Crowds." When there are enough diverse participants, collective predictions are often more accurate than those of individual experts because participants are putting their own money on the line. With this layer of constraint, they will evaluate information more cautiously, making them far from outsiders.
According to a 2024 study from Charles University, prediction markets, which allow participants to bet on future events, can demonstrate precise predictive capabilities across various fields, including finance, economics, politics, and public policy.
You might think that the predictive power of ten experts in a specific field could cover a wide range of the market, but when thousands of people put their own money on the line for an uncertain event, each person will draw on their knowledge and information to make judgments. Because all available information is aggregated, it can provide more accurate predictions than any single expert in a specific field.
What ICE is focusing on is this predictive capability and the data accumulated behind it, which is an important material for financial products.
The NYSE's Self-Rescue Movement Redefines the Business Model of Traditional Exchanges
Of course, not all prediction markets can achieve the same effect. According to research on "Sports Forecasting," the quality of data from prediction markets depends on "market liquidity," which is defined by platform trading volume and the number of participants, and is positively correlated with the accuracy of predicting outcomes. In other words, prediction markets with higher liquidity tend to show faster and more accurate results.
During the 2024 U.S. presidential election, Polymarket processed over $3.3 billion in transactions in less than 15 months after its launch, peaking at $2.5 billion in November. Originally, the platform excelled in predicting political events but has now expanded to sports, macroeconomic indicators, and cultural events, covering everything from Federal Reserve interest rate decisions to TV series finales.
When such a large trading volume and liquidity are recognized, these platforms, once considered illegal online gambling, have transformed into the infrastructure that the financial market craves. Now, ICE aims to integrate Polymarket's data into its internal trading systems, a move akin to how the financial sector integrated Bloomberg Terminal services, which provide financial experts with real-time market data.
It can also be said that ICE is essentially seeking to find complementarity for the gaps in the financial market. According to Kalshi's 2025 statistics, when predicting inflation data, the consensus accuracy of Bloomberg economists is only 20%, while the accuracy of prediction markets reaches 85%, a difference of 65 percentage points. Economists underestimated inflation in their predictions over eight months, while prediction markets accurately captured market realities through participants from diverse backgrounds.
If the two parties collaborate, it will create a complementary relationship between their data and traditional analysis rather than a substitutive one.
The NYSE's self-rescue movement essentially redefines the business model of traditional exchanges. With the outflow from the IPO market, declining trading volumes, and sluggish growth in data business, it can no longer rely solely on the traditional exchange profit model to maintain its competitiveness.
One can imagine that when ICE sells this data to hedge funds, investment banks, and central banks, they are not selling history but the pricing power of the future. In this increasingly unpredictable world, this could be the most valuable commodity.
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