As the Financial Conduct Authority prepares an investigation into the wholesale data market, a new study from Substantive Research uncovers alarming price disparities in the fees charged to users.
With research covering 60 of the largest asset management firms, with AUM of around $7 trillion, Substantive Research found that in index data, some institutions are being charged over 26 times (2632%) more than peers, by the same providers for comparable products and services.
Similar pricing inconsistencies are found in ratings data, where some firms are paying almost six times more than peers to the same providers for similar products.
In the emerging ESG space, institutions are also paying the same providers around six times more than peers for the same ESG data, replicating the price gouging seen in the traditional market data space.
The new data follows an earlier October study of buy-side firms with a smaller universe of respondents.
Mike Carrodus, CEO of Substantive Research, comments: “When we did the initial study in 2022 we were conscious we had a broadly representative survey universe, but were always curious as to how a more comprehensive dataset would influence our core conclusions. As more and more firms joined the project it became clear to us that we had only seen the tip of the iceberg.”
Earlier this month, The UK's Financial Conduct Authority promised an overhaul of the market data sector after a study found a lack of competition was hindering the UK's attractiveness to international investors.
The watchdog is preparing to launch a second study that 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.
Says Carrodus: “While we know that the FCA findings will be published within a timeframe of 12 months, our data already offers transparency in this opaque marketplace, where an incumbent vendor base enjoys significant pricing power.”