Some buy-side firms charged 10 times more than others for pricing and reference data, finds report

According to Substantive Research, pricing inconsistencies also exist within the ratings market and index market, as well as in the research and analytics market.

New insights from Substantive Research show that in the pricing and reference market, some providers are charging certain clients over ten times (1,075%) more than others for similar products and services.

The latest insights show that inconsistencies in the market data industry’s pricing continue to exist, posing challenges for heads of market data globally who need to manoeuvre through a lack of transparency around pricing and the availability of viable market data alternatives.

According to Substantive Research, this legacy opacity contributes to annual cost increases and complex relationships with a network of different providers.

“The pricing in these vital procurements is traditionally opaque and difficult to understand in context with peer procurement spend,” said Mike Carrodus, chief executive of Substantive Research.

“Some providers are more inconsistent in what they charge than others, which is important to understand as this will change consumers’ strategy and approach in each case.”

With respect to the ratings market, the insights found that the lowest to highest pricing for similar ratings products show that some providers are charging certain clients over three times more than other clients for similar products and services.

Similarly, in the index market, Substantive Research found that some providers are charging certain clients 13 times more than other clients for similar products and services. Inflation-driven increases in pricing were found to be applied inconsistently, with the variances of percentage increases applied due to inflation have become greater through 2020, 2021 and 2022.

Substantive Research’s insights also found that in the research and analytics market, some providers are charging certain clients more than three and a half times more than other clients for similar products and services.

In this area, only a minority of providers were found to be entirely consistent with their pricing, applying a standardised charging model which differs to the rest of the market.

“Gaining a clear perspective of pricing in these markets has always been a challenge, given every firm’s differences in terms of its size, structure and business model, and their specific and unique use cases with each vendor,” said Krystal Somaza, head of data and analytics at Substantive Research.

“But transparency is key for procurers, where an incumbent provider base has ensured formidable pricing power in a market with limited alternatives available to buyers.” 

Earlier this year, the UK’s Financial Conduct Authority (FCA) introduced new research unbundling exemptions in a bid to foster competition in the research market. Brought in under MiFID II, unbundling rules – which required brokers to separate payments for research and execution –  have been criticised by those who claim that it has led to a lack of competition in the research market, favouring larger providers who can afford to subsidise their research departments. 

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