Substantive Research warns of lack of transparency on Market Data pricing market

Rick Steves

Substantive Research has warned the industry of a pervasive lack of transparency on the Market Data pricing market, with a specific focus on opaque pricing across indices, ratings, research and analytics markets, terminals, and pricing and reference data.

The research and data discovery and spend analytics provider for the buy-side pointed to institutions paying up to 10 times more than peers on pricing and reference data.

For Index Data, some institutions are paying over 13 times (1300%) more than peers, and for Ratings Data, some institutions are paying over 3 times more than peers, the firm stated.

Large variance in market data pricing between wholesale market data buyers

Substantive Research’s June 2022 study identified a large variance in market data pricing between wholesale market data buyers with similar use cases, which showed that some institutions are paying more than twice as much as their peers for a single index from the same provider and almost five times more for reporting licenses.

These inconsistencies continue throughout the Market Data industry’s pricing, posing significant challenges for Heads of Market Data globally, who need to navigate a lack of transparency around pricing and the availability of viable market data alternatives.

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

“Many incumbent vendors have been extremely successful in becoming ‘have-to-have’ through investment in their products, technology and marketing capabilities, so their leverage in pricing can be seen as a natural reward for these efforts. However, within a volatile market climate, procurers are more focused than ever on ensuring efficiency in their market data budgets, creating an adversarial negotiation dynamic which is exacerbated in tough times”, Carrodus continued.

“Greater transparency can only ensure the right balance between providing the right incentives for vendors, while also allowing consumers to optimise their budgets. We’re proud to be able to respond to our customer’s wishes in this way and use our proven methodologies to help them understand the truth within these opaque pricing frameworks.”

Krystal Somaza, Head of Data & Analytics at Substantive Research, said, “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. 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.”

Pricing and Reference, Ratings, Index, R&A

Substantive Research has found a number of pricing inconsistencies for the last 12 months, including:

Pricing and Reference Data market: Some providers are charging certain clients over ten times (1075%) more than other clients for similar products and services

Ratings market: 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; The range of increases applied with inflation as the driver is also broad here, having grown in 2021 and stabilised in 2022

Index market: The lowest to highest pricing for similar developed market index products show that some providers are charging certain clients 13 times (1300%) more than other clients for similar products and services; Inflation-driven increases in pricing are applied inconsistently – and the inconsistency of percentage increases applied due to inflation become greater through 2020, 2021 and 2022

Research & Analytics market: The lowest to highest pricing for similar terminal products show that some providers are charging certain clients more than three and a half times more than other clients for similar products and services; A minority of providers in this area are entirely consistent with their pricing, applying a standardised charging model in contrast to the rest of the market

Substantive Research argued in favor of best practices in negotiations. “This may not drive huge price decreases given the power dynamics in this market, but is proven to mitigate the level of increases year-on-year per provider and therefore impact materially across the entire budget.”

Even when clients’ structures, needs and requirements are all accounted for, prices still vary significantly.

The Substantive Research insights are based on its Market Data Spend Analytics tool, an “apples-to-apples” Market Data Spend Analytics service for asset managers, wealth managers and hedge funds.

Read this next

Retail FX

Interactive Brokers adds 680k accounts, daily trades hit two-year high

Interactive Brokers LLC (NASDAQ: IBKR) recorded 2.44 million daily average revenue trades (DARTs) in February 2024, marking a notable increase from the 2.2 million transactions observed in the previous month. This figure represents the highest DARTs reported in two years, indicating an 11 percent monthly surge and a 15 percent year-on-year rise.

Retail FX

Financial Commission adds Ultima Markets to membership roster

Multi-asset brokerage firm Ultima Markets, operating under the trading name Ultima Markets Ltd, has been granted membership of the Financial Commission, marking the most recent inclusion into the ranks of the self-regulatory organization.

Digital Assets

Bitcoin hits fresh record high amid massive short squeeze

Bitcoin has surged to record highs against both the euro and the pound, hitting €60,447 and £51,736 respectively on Coinbase. The primary cryptocurrency has seen an almost 7% increase in the past 24 hours.

Digital Assets

US court rules crypto trades as securities in Coinbase case

A US court ruled that trading crypto assets on platforms like Coinbase constitutes securities transactions.

Market News

Weekly Data: Oil and Gold: Brief Review before the NFP

This preview of weekly data looks at USOIL and XAUUSD where economic data coming up later this week are the main market drivers for the near short-term outlook.

Institutional FX

FXSpotStream reports lower volumes for February 2024

FXSpotStream’s trading venue, the aggregator service of LiquidityMatch LLC, reported its operational metrics for February 2024, which moved lower on a monthly basis.

Fundamental Analysis

Global FX Market Summary: EUR, USD, Gold March 4th,2024

US Dollar Weakness: The US Dollar (USD) is currently struggling to gain strength due to a combination of factors.

Technical Analysis

Bitcoin Technical Analysis Report 4 March, 2024

Bitcoin cryptocurrency can be expected to rise further toward the next resistance level 69000.00 (former multiyear high from January)

Opinion

Finding Opportunity in Challenge: Why New Regulations Offer a Chance For Business to Get on Top of Data Management

The combination of CESOP, PSD3 and the PSR, has put businesses under new pressures. In this engaging article, André Casterman, Senior Advisor at Intix provides invaluable guidance on how companies can stay ahead of the curve.

<