The surge in market data prices in recent times has now reached an untenable level, wherein costs have now overtaken firms’ budgets, according to a joint whitepaper released by Substantive Research and Expand Research.
Speaking to The TRADE, Mike Carrodus, chief executive of Substantive Research, explained: “Two separate analytics firms have come together to compare our recent insights and conclusions on the market data industry, and the messages from our respective analysis were identical – the market data cost outlook as it stands is unsustainable. Spend levels and vendor increases are far outstripping banks and asset managers’ ability to increase budgets – something has to give.
Specifically, the average renewal increase for major vendors was 15% in 2024, while annual market data budgets only saw a 2.01% growth in 2024 – with 3.1% projected for 2025, according to Substantive.
Expand Research’s findings painted a similar picture, demonstrating that overall market data spend increased by 8.1% in 2024 (the highest in recent years).
The lack of public pricing information is a key contributor to this overall situation, Substantive and Expand Research highlight, wherein firms are having to deal with these rising costs in the dark – without helpful checks and balances across businesses.
The FCA’s recent investigation into pricing ruled out “significant intervention” because of “potential unintended consequences,” it confirmed in February 2024. In response to this, Expand and Substantive’s whitepaper affirmed that “financial institutions are facing enormous challenges from a market driven by provider power.”
Read more: Market data prices rising ‘faster than ever’ despite FCA investigation, new data finds
Carrodus further explained: “It’s remarkable how a small group of index, ratings, terminal and ESG providers have become so integral to market infrastructure, and many would say that they are entitled to ensure they price robustly given their have-to-have status.
“But the opacity and inconsistency in pricing models means that market data consumers are flying blind with a top three cost line item, doing their best to mitigate year-on-year price increases, without any understanding of how their payments compare to the wider market. The numbers are not adding up.”
Also among the findings, the ‘market data pricing – 2024 in review’ paper highlighted that some firms are currently paying up to 12 times more than their peers for the same products from the same vendor.
In addition, 2024 was the first time a reduction in the average number of vendors used for the first time.
The insights into consumers’ spend levels also revealed that when it comes to ESG data spend, the significant year-on-year increases over recent years are now slowing down – with an increase of just 18% in 2024, versus the 50% or more increases of previous years.
Jens Munthe, principal at BCG Expand, said: “Our study, including Substantive Research’s data, gives us the clearest picture yet of a troubling trend in the industry – where market data costs continue to accelerate well beyond market data budget growth.”
“Financial institutions are facing cost pressures and margin compression throughout their organisations, so it is unsurprising that their c-suites are now focusing on the challenges of rising spend in market data. However, this attention is exactly what the market data teams have been asking for – with buy-in from senior management, they can accelerate cost reduction and avoidance initiatives.”