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Substantive Research White Paper Reveals Disparities and Sharp Increases in Wholesale Market Data Pricing

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Substantive Research, a provider of research discovery and research spend analytics for the buy side, has published a White Paper detailing its latest findings on wholesale market data pricing. The report comes in anticipation of the UK’s Financial Conduct Authority’s (FCA) Wholesale Market Data Study, expected by 1 March 2024.

The FCA initiated its study in March 2023 to address concerns from both the buy and sell sides about the transparency and consistency of market data pricing. The investigation, conducted under the Enterprise Act, aims to examine potential anti-competitive practices in the markets for benchmarks, credit ratings data, and Market Data Vendor (MDV) services.

A Substantive Research survey from March 2023 highlighted significant price disparities among consumers of market data products. Some institutions reported paying over 26 times more than their peers for comparable products. Subsequent research indicated that vendors were imposing aggressive price increases, averaging 12%-13% above inflation, during recent renewal negotiations.

This latest White Paper encompasses responses from both buy and sell side firms, with 90% of participants having renegotiated market data supply agreements in 2023. Key findings include:

  • Major vendors increased prices by up to 50% for identical use cases, often citing ‘changes in pricing structures’.
  • 65% of respondents were informed by vendors that they were previously under a heavy discount, leading to higher payments to align with peer pricing.
  • ‘Removal of discounts’ was a prevalent justification for many price hikes.
  • ‘New pricing models’ accounted for 10% of increases.
  • ESG data pricing saw an average increase of 33% for renewals and 35% for year-on-year increments, primarily as firms transition from discounted trial rates to long-term pricing structures.

These findings highlight the complexities and challenges in the wholesale market data industry, particularly in a period marked by heightened market volatility and significant cost pressures for firms on both sides of the market. The upcoming FCA study is expected to shed further light on these issues and potentially influence future regulatory actions.

Mike Carrodus, CEO of Substantive Research, commented: “Our latest study highlights once again the importance of the FCA’s review into pricing practices for wholesale market data.  Both the buy and sell sides will be waiting with bated breath for 1 March, to see what conclusions the FCA has reached.  As the FCA announced it was using its powers under the Enterprise Act, the market is hoping for significant changes to the way this market is run, anything less and consumers of market data will have to make fundamental changes to their data budgeting and procurement processes.”

He added: “A key dynamic we’ve uncovered is that by the time a consumer’s discounts are removed over a multi-year agreement, vendors have raised the ‘standard’ price again, and by a lot, sparking another negotiation.  This means that firms procuring market data never catch up with what vendors say they should be paying.  Vendors are justifying price increases by saying it is bringing firms in line with what peers are paying, but these increases are constantly being applied to the entire market.”

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