European stock exchanges are increasingly turning to market data sales to compensate for adverse market conditions that should have resulted in a downturn in equity market revenues such as declining equity trading volumes, shrinking market share, and a diminishing customer base.
This shift has dramatically driven up the cost of equity market data, which is essential for issuers, investors, and market intermediaries to conduct their daily business, according to research by Market Structure Partners.
The research, commissioned by a coalition of trade and other industry associations, presents a critical analysis of how the equity market data business and fee structures of Europe’s largest exchanges (Deutsche Börse, Euronext, LSEG, Nasdaq Nordics and SIX Swiss Exchange Ltd) have evolved and how it stifles growth and innovation.
Thomas Richter, CEO of the German Investment Funds Association, BVI, said: “Asset managers are legally forced to use stock market prices, benchmarks, credit ratings, and other data from third-party providers. Because of the existing oligopoly market structures with only a few providers per segment, there is a case for competition law authorities. We call for an EU data vendor act that regulates the commercial behaviour of these entities. Because if we don’t, the already considerable cost pressure in the fund industry will intensify even further – also to the disadvantage of the consumers.”
Tanguy van de Werve, Director General of EFAMA, said: “Competitiveness is high on the policy agenda, including boosting the competitiveness of EU capital markets. Addressing the harmful impact of the oligopoly at the heart of market data access would lower trading costs, encourage new market entrants, and promote innovation. EU capital markets are underperforming their global peers, a trend that has only solidified over the last few years. Tackling high market data costs should be an obvious choice for policymakers looking to reinvigorate European capital markets.”
