A recent study conducted by Substantive Research reveals that market data prices are escalating at unprecedented rates, even as the Financial Conduct Authority (FCA) continues its review of competitive practices within the sector.
In its August 2023 update on the Wholesale Market Data Study, the FCA announced plans to publish its findings in March 2024. The study aims to address concerns regarding effective competition, examining issues such as the bundling of core services with other data offerings, restrictive usage terms, high market entry barriers, significant renewal fees, and a lack of meaningful innovation.
Amid increasing regulatory scrutiny, Substantive Research’s 2023 analysis highlights an aggressive trend in market data pricing, marked by inconsistencies in charges for identical products and opaque agreements. Key findings from their analysis of market data contract renewals in 2023 include:
– Ratings agencies are seeing an average price increase of 12% for unchanged customer use cases, not accounting for year-on-year inflation within multi-year contracts.
– Index providers are experiencing a 13% average price hike for unchanged customer use cases, with some providers raising prices by as much as 600%.
– For certain products, some index consumers are paying over 26 times more than others for similar needs.
– Multi-year agreements signed in 2022 indicate an average annual inflation rate of 5%, while new agreements starting in 2023 feature an increased rate of 8%.
Mike Carrodus, CEO of Substantive Research, emphasizes that data consumers face additional challenges as market data providers revise their pricing structures. These changes include greater bundling of products, which complicates the decision-making process for consumers who may prefer to purchase specific offerings, as well as variations in primary pricing mechanisms, further complicating cost comparisons with previous agreements.