The UK’s financial watchdog has ruled out intervening in the sale of market data citing the fear of “unintended consequences”.
The decision of the Financial Conduct Authority (FCA) comes after a year-long examination of the wholesale data market to see if asset managers were overpaying for credit ratings data, benchmarks and other market data vendor services
In its final report, the FCA found several areas of the market where improvements could be made and where competition was not working effectively.
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According to the regulator, there is evidence that ‘market power’ is preventing, restricting or distorting competition. Markets are too concentrated, providers are making excessive profit and face limited competition from challengers.
However, the regulator has decided not to refer the case to the Competition and Markets Authority.
Instead, the FCA stated that it will focus on ways to “help support wholesale data being provided on fair, reasonable and transparent terms”.
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The FCA’s concern is that “significant intervention” could make it harder for UK managers to access quality data, even if they are paying too high a price.
“Our market study found that firms can access the data they need to make effective investment decisions,” said Sheldon Mills, the FCA’s executive director of consumers and competition.
“We do not believe the case has been made for significant interventions. However, we will examine ways to help support wholesale data being provided on fair, reasonable and transparent terms,” added Mills.
Market data costs must be addressed, associations warn
The FCA’s report was welcomed by the Association of Financial Markets Europe, mainly for the fact that it recognises the concern voiced by asset managers and other market participants about the cost of market data.
“We note that the FCA has recognised shortcomings in the three markets but has ultimately decided not to make a market investigation reference to the Competition and Markets Authority,” said AFME’s managing director of equities, April Day, and managing director of fixed income, Victoria Webster.
“As the FCA continues to develop its framework for the UK consolidated tape for bonds and equities, we encourage policymakers to ensure holistic market regulation of wholesale market data.”
