The UK Financial Conduct Authority (FCA) has launched a market study amid concerns that competition in wholesale data markets may not be effective.
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.
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.
The regulator invites all stakeholders to share their views, on the issues set out in the Terms of Reference for the market study including supporting evidence where relevant. Please provide any such representations in writing to wholesaledatamarketstudy@fca.org.uk no later than 30 March.
Also today, the FCA published key findings of a trade data report. Today’s report suggests the market currently does not work as effectively as it could in allowing effective competition and innovation which is a key part of the FCA’s strategy to improve the UK’s financial services sector.
The 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.
