Alongside its findings on competition in the market for trade data, the UK Financial Conduct Authority (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.
This new wholesale data market study will investigate potential competition problems in the markets for benchmarks, credit ratings data and market data vendor services and whether they could be resulting in higher costs for investors, less effective investment decisions and preventing new firms entering these markets.
Sheldon Mills, executive director for Consumers and Competition at the FCA, said in a statement: “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.”
The Trade data report found:
- Some trading markets are concentrated among a few firms so there is little choice for users not to buy this important data and switching supplier is not an easy option.
- The way data is sold can be complex, making it harder for data users to make informed choices.
- Complexity and limited choice result in additional costs to data users. These are likely to be passed on to UK retail investors and savers.
- Despite rules in place requiring delayed data to be distributed for free, many users end up with little choice but to pay for data.
- The FCA is working with the Government to develop consolidated tapes, which collect wholesale data across the market and distribute them in single, standardised data feeds. Consolidated tapes could help improve the overall cost, quality and accessibility of wholesale data.
Launch of the wholesale data market study
The FCA’s new wholesale data market study will investigate whether the markets for benchmarks, credit ratings data and market data vendor services are working well. Benchmarks are widely used in financial markets, for example as a reference for funds to track or to evaluate an asset manager’s performance.
Access to high-quality credit ratings helps investment managers and others assess financial risk, influencing which investments they make. Market data vendors are key players in wholesale data markets as they provide a one stop shop for many wholesale data users.
If the FCA finds evidence of competition concerns in one or more of these markets, it will consider the most appropriate way 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.