As the Financial Conduct Authority initiates an investigation into the wholesale data market, a new study from Substantive Research reveals concerning price disparities in fees charged to users.
Research examining 60 of the largest asset management firms, collectively managing approximately $7 trillion in assets, has shown that for index data, certain institutions are paying over 26 times (2632%) more than their peers for comparable products and services from the same providers.
Similar inconsistencies in pricing are evident in ratings data, with some firms facing costs nearly six times higher than others for similar offerings from the same providers. In the growing ESG sector, institutions are also reportedly paying approximately six times more than peers for identical ESG data, echoing the price inflation seen in traditional market data.
This latest data expands upon an earlier study conducted in October involving a smaller sample of buy-side firms. Mike Carrodus, CEO of Substantive Research, noted, “When we conducted our initial study in 2022, we were aware that our survey universe was broadly representative, but we were curious about how a more extensive dataset might affect our main conclusions. As more firms became involved in the project, it became clear that we had only scratched the surface.”
Earlier this month, the UK’s Financial Conduct Authority announced plans to reform the market data sector following findings that a lack of competition is undermining the UK’s appeal to international investors. The FCA is preparing to launch a second study to investigate potential competition issues in the markets for benchmarks, credit ratings data, and market data vendor services, assessing whether these challenges are leading to higher costs for investors, suboptimal investment decisions, and barriers to entry for new firms.
Carrodus added, “While we anticipate that the FCA findings will be published within the next 12 months, our data provides important transparency in this opaque marketplace, where a small number of incumbent vendors hold considerable pricing power.”