A study by Market Structure Partners (MSP) has highlighted how Europe’s largest stock exchanges are increasingly relying on market data sales to maintain overall revenues despite a significant downturn in equity trading volumes, market share, and customer base. The research, commissioned by a coalition of trade and industry associations, critiques the evolving fee structures of Deutsche Börse, Euronext, London Stock Exchange Group (LSEG), Nasdaq Nordics, and SIX Swiss Exchange, suggesting that these practices stifle market growth and innovation.
The report notes that total equity market revenues, which comprise both trading and market data income, have remained relatively stable due to rising market data fees. This trend persists even though the costs associated with producing and disseminating market data have not materially increased, and many exchanges continue to operate on decade-old trading platforms.“We’re essentially arguing that market data should be free because it wouldn’t exist without trading,” says Niki Beattie, CEO of MSP. “In a competitive trading market but a non-competitive data market, incumbent exchanges profit from mandatory data purchases, which means that while trading fees are under pressure, data fees are not. This is stifling innovation and competition. Alternative venues also rely on data to attract business, yet incumbents justify their data charges as cost recovery while overlooking that these other venues face costs that can mostly only be recovered from trading fees.”
The study points to complex and arbitrary fee structures, with pricing varying based on data consumption methods, user types, competitive status, and device usage. Notably, machine-based data usage is now 35 to 97 times more expensive than human-based usage compared to 2017. Competitors such as alternative trading platforms and independent index providers have faced the steepest increases, with non-display data costs rising by up to 481% for trading platforms, and index providers facing increases of 97% to 170% across multiple exchanges.
“Hundreds of thousands of end users access market data through third-party vendors that bear the costs of dissemination, not the exchanges,” points out Beattie. “Yet, exchanges impose premiums unrelated to their own costs—such as fees for machine usage or multiple devices—even though users provide and maintain that hardware. Since exchanges already recover their costs through trading fees, charging based on how businesses use data or how many people access it is unjustified. We spoke to small fintech businesses who say navigating the complexities in contracts can cause indeterminate financial risks that prevent businesses from getting off the ground.”
The report calls for regulatory intervention to ensure that market data pricing aligns with trading activity, proposing that data be treated as a by-product of trading rather than a standalone revenue stream. Without such measures, MSP argues that legislative action may be necessary to refocus exchanges on market growth and ensure greater transparency in data fee structures across the financial ecosystem.
Beattie emphasises that making market data free would resolve many issues and accelerate the creation of a consolidated tape. “Regulators often ask whether a consolidated tape would solve these problems, but that’s putting the cart before the horse. Addressing data costs first would remove vested interests, allowing any technology provider to deliver consolidated data. If regulators cannot make data free, they must establish clear definitions for exchange and trading venue licenses—and revoke them when behaviours undermine market integrity.”
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