The UK’s Financial Conduct Authority (FCA) has launched a study into competition within the wholesale data market following a report that uncovered shortcomings in competitiveness, cost and concentration within the trade data market.
The FCA’s Trade Data Review, published in March, revealed that a lack of innovation, low levels of buyer power and a high concentration of large firms were leading to little choice for data consumers.
The upcoming wholesale data market study will investigate whether the markets for benchmarks, credit rating data and market data vendor services are working well.
It will seek to highlight more details surrounding the complexities in how data is bought and sold and the additional costs faced by data users as a result of limited choice.
The FCA also noted that many users have little choice but to pay for data, despite rules requiring delayed data to be distributed for free.
In 2021 UK trading venues earned more than £200 million from the sale of trade data, the FCA said.
If the FCA finds evidence of poor competition impacting market participants, it may consider rule changes as part of the upcoming adoption of retained EU law and wider influencing of international standards.
The FCA said it is working alongside the government to develop consolidated tapes, which “collect wholesale data across the market and distribute them in single, standardised data feeds”.
It comes as the EU grapples with introducing its own consolidated tape. Proposed as part of MiFID II, the EU’s consolidated tape would act as a single price comparison tool. It seeks to consolidate data across the EU, assist market participants in analysing market liquidity and increase investors’ capacity to evaluate the quality of execution of their orders.
The FCA will publish a market study report setting out its findings and further actions within 12 months and has invited stakeholders to share their views ahead of the study.
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