VOL. XCIV, NO. 247

MOAT TYPE BREAKDOWN

NO ADVICE

Tuesday, December 30, 2025

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Financial moat

Benchmark Pricing Power Moat

9 companies · 16 segments

Pricing power that comes from being the industry reference point (benchmark) or a must-have financial input. Customers and counterparties adopt it as the default standard, so fees can rise with limited churn.

Domain

Financial moat

Advantages

5 strengths

Disadvantages

5 tradeoffs

Coverage

9 companies · 16 segments

Advantages

  • Sticky demand: once adopted as the default, customers rarely switch.
  • Ability to raise fees: price increases often cause limited volume loss because the standard is embedded.
  • High operating leverage: incremental users or AUM can scale with low incremental cost.
  • Strong bargaining position: customers need the reference even if they complain about pricing.
  • Defensive halo: being the standard can pull in adjacent products (data, analytics, workflow tools).

Disadvantages

  • Regulatory risk: authorities may impose fee caps, mandate open access, or force governance changes.
  • Reputation and trust risk: benchmark errors, manipulation scandals, outages, or conflicts of interest can trigger rapid backlash.
  • Customer concentration risk: large asset managers, banks, or brokers can pressure pricing or sponsor alternatives.
  • Methodology and IP risk: legal challenges, copycats, or “good enough” substitutes can weaken exclusivity.
  • Cyclicality risk: revenue tied to trading volumes or market AUM can drop in down markets even if pricing holds.

Why it exists

  • The benchmark becomes the coordination point (everyone quotes it, tracks it, or must connect to it).
  • Switching is costly because contracts, workflows, compliance, and reporting are built around it.
  • Network effects or liquidity effects make the standard better as more people use it.
  • Regulatory or institutional recognition can entrench the standard.

Where it shows up

  • Index and benchmark providers (index licensing, ETF/portfolio benchmarks)
  • Exchanges and clearinghouses (liquidity hubs, transaction and clearing fees)
  • Payments rails and networks (must-connect acceptance networks)
  • Credit ratings and risk benchmarks (instixtutional trust inputs)
  • Market data and pricing feeds used for trading, valuation, and compliance

Durability drivers

  • Clear governance and auditability (especially for benchmarks used in regulated markets)
  • Deep integration into contracts, compliance, reporting, and vendor ecosystems
  • Liquidity flywheel (for exchanges) or assets-tracking flywheel (for indices)
  • Strong brand trust and long performance history
  • High-quality data pipelines and reliability (low downtime, strong SLAs)

Common red flags

  • Fee increases trigger meaningful customer churn or volume migration
  • Major clients publicly threaten to de-benchmark or launch alternatives
  • Regulators focus on market power, access, or conflicts of interest
  • Quality issues: data errors, methodology disputes, downtime
  • Rapid share loss to a new standard (often enabled by a platform shift)

How to evaluate

Key questions

  • What would a customer need to rebuild (contracts, reporting, compliance) to switch away?
  • Is the product legally or institutionally recognized as a standard?
  • Does usage create a flywheel (more users -> better benchmark/liquidity -> more users)?
  • How often have fees increased, and what happened to volumes or retention afterward?
  • Are large customers actively building internal substitutes or sponsoring competitors?

Metrics & signals

  • Net retention / churn (should be very strong for a true standard)
  • Pricing history (realized price increases over time)
  • Share of relevant AUM (indices) or share of liquidity/volume (exchanges)
  • Gross margin and operating margin stability through cycles
  • Customer concentration and renewal terms (multi-year, auto-renew, inflation escalators)
  • Regulatory actions, consultations, or litigation related to fees or governance

Examples & patterns

Patterns

  • Index/benchmark licensing tied to AUM
  • Transaction and clearing fees tied to volume
  • Data subscription fees tied to entrenchment in workflows

Notes

  • This moat is strongest when the benchmark is embedded in contracts and regulation, not just popular.
  • If the standard is only a brand preference, it is easier to displace.

Examples in the moat database

Curation & Accuracy

This directory blends AI‑assisted discovery with human curation. Entries are reviewed, edited, and organized with the goal of expanding coverage and sharpening quality over time. Your feedback helps steer improvements (because no single human can capture everything all at once).

Details change. Pricing, features, and availability may be incomplete or out of date. Treat listings as a starting point and verify on the provider’s site before making decisions. If you spot an error or a gap, send a quick note and I’ll adjust.