Buy-side institutions paying five times as much as peers for reporting licenses, finds report

According to Substantive Research, prices paid by buy-side institutions massively vary across reporting licenses, index access and index products.

Buy-side institutions are paying up to five times as much as their peers for some data products, a report by Substantive Research has found.

Prices range by 472% from the highest to lowest for reporting licences while prices received for supplying a single index from the same provider ranges by 219%.

The average spend on index products per provider have also been broken down to roughly 44% spent on licences and 56% spent on the underlying benchmarks.

“It’s not surprising that pricing is so inconsistent – each buy side firm’s footprint with their providers is specific to their particular needs and their own infrastructure. Add to that the complexity of mapping out a large firm’s exact use case across regions with each provider, and it’s clear that transparency is going to be a challenge,” Mike Carrodus, founder and chief executive of Substantive Research, told The TRADE.

According to Substantive Research, buy-side budgets vary from 0.55bps to 1.27bps of assets under management and represent one of the largest costs of doing business for an asset manager. It also found that potential savings could amount to $360 thousand per provider, noting as most institutions do not just use one provider, this number could be quickly multiplied.

“They [buy-side institutions] are already making great strides in creating a comprehensive and detailed view of their needs across their provider list, which is the first job,” said Carrodus when asked what institutions could do to minimise this cost.  

“The second job is to understand the wider context of how their budget management compares to the wider market, what pricing trends are across their peers, and therefore where they should target for greater efficiency.”

The report follows news that the UK’s FCA would be launching an investigation into data competition concerns including into trading data in January earlier this year.