UK trade data market not working ‘as it should’ as investors pay the cost of lack of competition, says FCA
A new study from the Financial Conduct Authority (FCA) has found competition in the wholesale data market is “not working as well as it should”, leading to extra costs for investors and savers.
Trading data includes information on the prices and volumes of financial products traded and supplied by venues such as stock exchanges.
The regulator said that more is needed to strengthen competition in this market to make the UK a more attractive place to do business.
Access to good quality, fairly priced trade data is important for the whole financial system, the FCA noted, enabling “properly informed, timely investment decisions”.
The watchdog found that trading markets are concentrated among a few firms meaning there is little choice for users and switching suppliers is not an easy option.
It also noted that data can be sold in complex ways, making it harder for data users to make informed choices.
Complexity and limited choice results in additional costs for data users, which are then likely to be passed on to UK retail investors and savers.
In response, 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,” the FCA said.
Alongside its findings on competition in the market for trade data, 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.
This new wholesale data market study will investigate potential competition problems in the markets for benchmarks, credit ratings data and market data vendor services. The FCA is concerned the structure of these markets could result in higher costs for investors and prevent new entrants from entering the market.
Executive director at the FCA Sheldon Mills said: “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.”