The UK’s Financial Conduct Authority (FCA) has published a new report suggesting that the market for trade data in the UK – both pre-trade and post-trade – currently does not work as effectively as it could.
The report is the outcome of a review conducted by the FCA that combined qualitative information on the business models of trading venues, financial data from venues and service providers, and survey responses from users of trade data.
The review discovered evidence of rising trade data prices impacting users and leading to instances where they choose not to purchase data due to its cost. This potentially has adverse knock-on effects on data users’ ability to make investment decisions or innovate.
According to the report, the reduced use of data could ultimately lead to poorer outcomes for retail investors and savers whose investments and savings depend on the efficient and effective use of such data.
The FCA is now working with the UK Government to develop consolidated tapes (CTs), which will collect wholesale data across the market and distribute them in single, standardised data feeds, with the aim of improve the overall cost, quality and accessibility of wholesale data.
“This report by the FCA identifies evidence that rising trade data prices could be leading to instances where financial institutions are choosing not to purchase essential information, on account of cost,” comments Joseph Cordahi, Product Strategy Director at NeoXam, a data management software company. “However, we also see situations where these same institutions will be repeating requests for data to providers, all because they do not have processes in place to reuse what they have already requested. As banks and asset managers become larger and operate in more jurisdictions, the importance of robust internal data architectures is increasing dramatically, to ensure that they are getting the absolute maximum value out of the plethora of information that they are consuming on a daily basis.”
Alongside the report, the FCA has launched a market study amid concerns that competition in other types of wholesale data markets may not be as effective as they should be. The study will investigate the markets for benchmarks, credit ratings data and market data vendor services to identify whether they are leading to higher costs for investors, less effective investment decisions and preventing new firms entering these markets.
Sheldon Mills, Executive Director, Consumers and Competition at the FCA, commented: “Our work aims to make sure that competition is working well in wholesale data markets and market participants can access data they need. This is important to help foster the competition and innovation that will help boost the UK economy and secure better outcomes for investors. We will use the findings from our wholesale data work and findings from our market study to guide us in our efforts to achieve these aims.”
If the FCA finds evidence of competition concerns in one or more of these markets, it will consider ways to address these concerns, including, for example, through rule changes as part of the upcoming adoption of retained EU law and wider influencing of international standards.
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