Market data faces scrutiny from U.K. regulator

Citing concerns about a lack of competition, the U.K.’s Financial Conduct Authority (FCA) is tackling a long-standing investment industry complaint — the cost of market data.

The FCA will launch a series of studies this year to examine the state of competition in the market for trading data.

Specifically, the regulator plans to undertake reviews of the markets for financial benchmark and index data along with a study of the cost of credit ratings data. The FCA has also begun collecting information on the market for wholesale trading data that’s typically supplied by stock exchanges and other trading venues.

These efforts come in response to concerns about limited competition in the markets for benchmark, index, credit rating and trading data that “may increase costs for investors and affect investment choices,” the FCA said.

“Access to wholesale data is really important for those who want to make investment decisions. Without it, they lack the information they need to make properly informed choices,” said Sheldon Mills, executive director, consumers and competition at the FCA, in a release.

Mills said the the regulator’s planned studies “are intended to ensure that competition is working well, that information is available to market participants that want it, and that innovation is keeping up with market developments.”

Lack of competition in the provision of market data has long been an industry bugbear.

The Investment Industry Association of Canada (IIAC) has repeatedly voiced concerns to regulators about the cost of market data, including benchmark and index data.

Last year, in a submission to the International Organization of Securities Commissions (IOSCO), the IIAC called market data “an essential component of the core business of investing.”

“The excessive and increasing cost of market data acts as a barrier to entry to the industry for investment firms, particularly smaller firms with fewer resources,” the submission stated.

“As with other monopoly and quasi-monopoly industries, it is incumbent on the regulators to counterbalance their market dominance with regulation and enforcement that ensures that companies do not exploit their position in the market to the detriment of their clients and the market participants.”

In response to similar concerns in its market, the FCA has pledged to investigate the issue.

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.