The UK’s financial regulator is to review the availability and cost of market data after customer complaints that limited competition may be pushing up prices and affecting their investment decisions.
The Financial Conduct Authority said on Tuesday that it was concerned about pricing in markets for benchmarks, indices and credit ratings, as well as the trading data distributed to customers by stock exchanges, information providers and alternative trading venues.
Data is one of the most sensitive areas of trading, with exchanges and their broking and investor customers frequently arguing over ever-rising costs and the ownership of information. Benchmarks, such as London’s FTSE 100, are widely used across all markets, from shares 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 launch a review of credit ratings data by the end of the year, it added.
The FCA’s review, which began in March 2020, follows similar studies by regulators in the US and European Union in to market practices and the terms for the sale of trading data.
Brussels wants to make it easier for banks and fund managers to find prices of stocks and bonds throughout the single market and has mandated a “consolidated tape” that bundles together information from trading venues in the bloc.
Access to and the cost of data is highly contentious. The sale of trading data and financial benchmarks is a significant component of stock exchanges’ revenues but their customers, like fund managers and high-frequency traders, often complain over the ever-rising costs.
Some regulatory mandates require investors to have the most up-to-date and accurate prices. Much of the market data is not standardised, making it costly and time-consuming to go to each venue. Technical issues and high costs may also act as a deterrent to switching benchmark providers, the FCA said.
Exchanges say they provide market service that underpins the quality and reliability of the market, and its cost is only a fraction of the revenues customers earn.
The regulatory push comes as the UK government is examining a range of wholesale market practices, in order to boost the City of London’s global pull for international investors after Brexit. Last year Chancellor Rishi Sunak committed to helping a similar tape of record emerge for the UK.
“Access to wholesale data is really important for those who want to make investment decisions. Without it, they lack the information they need to make properly informed choices,” said Sheldon Mills, executive director, consumers and competition at the FCA.
