Financial Conduct Authority to tackle competition problems with the trade data market

A new Financial Conduct Authority (FCA) report has found that competition in some parts of the wholesale data market is not working as well as it should. 

Access to good quality, fairly priced trade data is important for the whole financial system. It allows for properly informed, timely investment decisions. Trading data includes information on prices and volumes traded and supplied by venues, like stock exchanges, where shares and other financial products are bought and sold. 

Markets in which firms compete to provide good quality wholesale data will make the UK an attractive place to do business for a wide range of financial service providers, and so can improve the UK’s international competitiveness. 

The FCA’s work in this area is fundamental to its efforts to strengthen the UK’s position in global wholesale markets while maintaining the UK’s reputation as a leading global market of choice. 

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 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, Consumers and Competition at the FCA, said: 

“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.” 

Trade data findings 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.  

Among the findings, 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. 

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.  

Notes to Editors 

• Trade data findings report. 
• Wholesale data market study. 
• The FCA 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. 
• The FCA will publish a market study report setting out our findings and further actions within 12 months. It will provisionally decide whether to propose to refer one or more of these markets to the Competition and Markets Authority for further investigation within six months. 
• In 2021 UK trading venues earned revenues of more than £200 million from the sale of trade data. 
• The FCA will assess whether any further work is needed in wholesale data markets within the context of wider priorities, upcoming legislative changes implementing the outcomes of the Future Regulatory Framework (FRF) Review, and developments and the global context in wholesale data markets.