Heated exchanges centred on market data pricing pressures at the FIX EMEA Trading Conference on Thursday – specifically, how costs are affecting market entry and liquidity growth.
Recently new transparency requirements have meant that exchanges must disclose the margins they make on market data, translating into pricing model restructuring, which many trading venues are concerned will result in higher operational costs, particularly for smaller firms.
Specifically, this impact has raised questions around creating limited competition across European markets, and making it difficult for new entrants to stake their place and concentrating liquidity back onto primary exchanges.
This sentiment was echoed by one panellist, who said: “There’s a real concern about price of market data, which has to be studied. The whole of the industry, or many parts of it, is lobbying very hard for price controls on trading venues. We pushed very hard against, because 85% of the cost of market data doesn’t sit with venues. It sits with distributors and unregulated data vendors.
Building on this, discussions also highlighted the need for data-driven studies to be carried out before price controls are implemented.
“In normal regulation, you would prove a theory of harm, but despite the hundreds of thousands of euros spent on sponsored reports, that work was never done,” commented one expert.
In addition, the point of competition was frequently surfaced throughout the debate and also highlighted the potential impact that rising data costs may have for global investors considering European markets, and how this may skew their perception.
One panellist questioned: “We’re talking about we want to grow the market. Why are we putting up barriers?”
“I remember having previous conversations, around the fact that participants weren’t willing to enter the market from the US because they thought it was a little over fragmented in terms of post-trade, which is a valid and good point, but also because of the cost structure.”
Read more – Fixed income AI surge is increasing market data demands rather than easing pressure
However, as one panellist rebutted, rising costs and limited competition may be unavoidable, due to the nature of market data itself.
“We have to charge for market data, and competition is extremely difficult because the nature of market data is to be monopolistic.”
With opinions differing on how best to approach concerns around market data, the debate appeared to ultimately underscore a broader challenge facing European markets. Namely, how to balance transparency and fair pricing with the need to encourage competition and market growth.
How that balance is navigated through regulation and policy shifts in the coming months and years will certainly be one to watch.