CSA to consider market data reforms

The cost of market data is a long-standing industry concern, and the Canadian Securities Administrators (CSA) are now considering reform to improve access to real-time data.

Last month industry trade group the Investment Industry Association of Canada (IIAC) published a letter to the CSA that called for regulatory action to address the cost of market data, which it called “excessively high” and blamed, in part, on a lack of competition in the provision of market data.

In that letter, IIAC called for increased transparency from trading venues on the cost of generating data and the revenue that it produces for those firms, and it recommended that regulators intervene to keep data fees in line with costs.

On Thursday the CSA published a consultation paper that includes the results of its review of the current landscape for the provision of market data in Canada, and sets out a series of possible options for reform, ranging from short-term measures that increase transparency to eventually remaking the regulatory framework.

“The initial proposed options focus on ensuring the existing regulatory regime facilitates fair access to real-time market data by increasing transparency and standardized terminology, among other things,” the CSA said in a release.

The CSA’s review found that trading venues have become increasingly reliant on revenue from data fees. The review looked at the evolution of the market between 2006 and 2019, finding that “both the level and the composition of core marketplace revenue has changed since 2006.”

In particular, it found that marketplaces’ revenues increased at a 1.6% compound annual growth rate (CAGR) from 2006 to 2019, and that revenues rose at a 2.5% CAGR over the latter five years.

In those 13 years, market data revenue rose from 40% of exchanges’ revenues to almost 50%, and access revenue increased to 12% of revenue (from effectively zero in 2006). Trading revenue declined from a 60% share to 39%, as competition in this part of the business ramped up.

The paper indicated that the initial reform ideas being considered by the CSA are aimed at possible implementation in the next one to two years, while the prospect of more fundamental reform to overhaul the regime for accessing market data is at least a couple of years away.

The paper is out for public comment until Feb. 10, 2023.

“The issues concerning access to [real-time market data] are complex and there are many different views as to how they can be addressed,” the CSA said in its paper. “We intend to consider the feedback received on this consultation paper to determine next steps.”

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.