The UK’s financial regulator is reviewing the availability and cost of market data following customers’ complaints that limited competition could push up prices and influence their investment decisions.
The Financial Conduct Authority said on Tuesday it was concerned about prices in markets for benchmarks, indices and credit ratings, as well as the trading data distributed to clients by stock exchanges, information providers and alternative trading venues.
Data is one of the most sensitive trading areas, with exchanges and their brokerage and investor clients regularly arguing over ever-rising costs and information ownership. Criteria, such as London’s FTSE 100, are widely used in all markets, from equities to derivatives, for valuations of thousands of individual portfolios.
The study into market data services will begin in the summer, the FCA said. The regulator will begin a review of credit rating data by the end of the year, he added.
The FCA’s review, which started it in March 2020, follow similar studies by regulators in the US and European Union on market practices and the terms for selling trade data.
Brussels want to make it easier for banks and fund managers to find stock and bond prices throughout the internal market and has commissioned a “consolidated bond” that ties together information from trading venues in the block.
Access to and cost of data is highly controversial. Selling trading data and financial metrics is a significant component of stock market revenue, but their clients, such as fund managers and high-frequency traders, often complain about the ever-rising costs.
Some regulatory mandates require investors to have the most recent and accurate pricing. Much of the market data is not standardized, making it expensive and time consuming to go to each venue. Technical issues and high costs can also serve as a deterrent to changing from benchmark providers, the FCA said.
Exchanges say they provide market service that supports the quality and reliability of the market, and its cost is only a fraction of the revenue that customers earn.
The regulatory pressure comes as the UK government explores a range of wholesale market practices to boost the City of London’s global attractiveness to international investors after Brexit. Last year Chancellor Rishi Sunak dedicated to help a similar recording tape for the UK emerge.
“Access to wholesale data is really important for those who want to make investment decisions. Without it, they do not have the information they need to make informed choices, ”says Sheldon Mills, executive director, consumers and competition at the FCA.