Wholesale trade data review – findings report [pdf]

The Financial Conduct Authority, FCA, has published the findings from a recent review of the market on trading data which is naturally dominated by large trading venues and which is of great importance to a wide range of users. Such users are, for instance, fund managers that use trade data to identify investment-worthy assets or to investment firms which need trade data to comply with certain pre- and post-trade reporting requirements. Due to this significance, the FCA has looked into the market on the sale of trade data in an effort to identify possible competition issues, price issues, or any other issues that could hinder the market from functioning properly.
##### The key findings are briefly noted below:
– Generally speaking, one aspect is functioning well in this context: those who seek trade data have or may have access to such data.
– The trade data market is dominated by five key players which make up nearly 100% of the revenues generated from the sale of trade data.
– In 2021 alone those trading venues increased their revenues from the sale of trade data by 28%, compared to a five year average for 2017 through 2022 of 22% annually.
– Due to these price increases, some market participants refrain from purchasing trade data despite the fact that they may need it to make well informed decisions.
– With limited competition and limited bargaining powers, few firms change their data suppliers.
– Many trade data sellers have complex pricing structures, sometimes leaving firms with insufficient information about the actual costs they will incur.
– The same holds true for the contract terms altogether which are sometimes difficult to comprehend thereby unnecessarily increasing compliance costs of those that purchase trade data.
##### Implications and the FCA’s way forward:
To sum it up, the FCA notes that the market is currently NOT functioning as intended. Therefore, the FCA will launch a wholesale data market study to identify those key issues that may need to be regulated by the Authority. At the same time, the FCA and the UK government will enhance their efforts to come up with a consolidated tape. A first consultation in this context is expected in the summer.