Market participants have grown increasingly frustrated at rising exchange-led data costs , as they struggle to keep up with a welter of new regulations on data usage .
Many believe that exchanges – which are amongst the biggest vendors of trading data – have been indulging in monopolistic practices , ramping up data fees as well as introducing complex and strict new data licensing measures .
With fee increases showing no sign of being curbed in the near future this is becoming a serious cause for concern for investors .
Data fees from exchanges have risen across the board over the past few years . Practically all the major European exchanges , including LSE , CBOE , NYSE Euronext and Eurex , have increased their overall data charges ( see chart ) from anywhere between 2 % to 55 % in 2016 alone .
Running concurrently with this , participants have seen exchanges introduce complicated new market agreements , breaking down data sets and charging separately for different types of data and incentivising end-users to trade by offering free data which is taken away quickly after . It is leading to a growing sense of discontent among buy-siders .
“ If I am an asset manager with a trading desk in London and New York with five dealers on it – the one in New York will cost $ 16k for data while the one in Europe will cost $ 90k ,” says Arjun Singh-Muchelle , senior adviser , capital markets at the Investment Association , the trade body for UK fund managers .
“ The difference is enough to hire another dealer . We say there needs to be a competition review of data across Europe . There could potentially be an abuse of dominant market positions which could lead to monopolistic behaviour .”
Singh-Muchelle ’ s view is widely held . Mark Spanbroek , acting chairman of the FIA European Principal Traders Association ( EPTA ), an organisation representing venues , exchanges , dark pools , and so on ,” says Michael Richter , director , Markit Trading Analytics .
“ This creates a challenge for those looking to build accurate analytic benchmarks , for measuring best execution , and certainly is driving both the demand for data and the cost of acquisition .”
MiFID II has sought to step in , prompting a new level of data management and trade retention than seen before .
The regulation will force exchanges and other trading venues to price their data on a
THERE COULD POTENTIALLY BE AN ABUSE OF DOMINANT MARKET POSITIONS WHICH COULD LEAD TO MONOPOLISTIC BEHAVIOUR
ARJUN SINGH-MUCHELLE , SENIOR ADVISER , CAPITAL MARKETS , THE INVESTMENT ASSOCIATION
Europe ’ s proprietary traders , explains : “ Things need to be way more efficient and the pricing of market data needs to come way down . It is not a matter of time as we have waited long enough , and it is not going to happen unless someone drives this .”
JUSTIFYING COSTS Buy-side firms are now more accountable to their investors as a result of the best execution requirements and are obliged to increase their sophistication in data capture and analysis .
“ The evolving microstructure of most markets has become more fragmented with different
“ reasonable commercial basis .” It also states that the price of market data should be based on the “ cost of producing and disseminating it at a reasonable margin .”
Data charges will also have to be unbundled by disaggregating data by asset class , by country of issue , by the currency in which an instrument is traded , and according to whether data comes from scheduled daily auctions or from continuous trading .
Regulators now expect reporting mechanisms to provide investors with real-time information on market transactions across all execution
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