- For index data, some institutions are paying over 26 times (2632%) more than peers*
- For ratings data, some institutions are paying almost 6 times more than peers*
- For ESG data products, some institutions are also paying 6 times more than peers*
*These are prices charged by providers to different clients for comparable products and services
Substantive Research, the research and data discovery and spend analytics provider for the buy-side, today published its 2023 update on the current state of the Market Data pricing market, based on insights generated by its Market Data Spend Analytics service. This comes at a time when the FCA questionnaire for consumers of market data is expected to be issued ‘imminently’ as part of its wholesale data market study.
What’s more, on 2nd March, as the FCA launched its wholesale market data study covering benchmarks, credit ratings data and market data vendors, the regulator said it was looking for stakeholder views on “whether we should make a market investigation reference to the Competition and Markets Authority (CMA) about one or more of these markets.”
The latest Substantive Research update follows the publication of the initial study in October 2022, which revealed that some institutions were paying 13 times more than peers for comparable licenses and products. Upon publication of that analysis, a large number of new firms joined the survey group, increasing the dataset by 50% and creating a much deeper and more detailed picture of market data pricing.
The new results show that the levels of inconsistency are even more extreme than initially revealed – with some market data consumers paying up to 26 times more than others for comparable use cases.
The research covers 60 of the largest asset management firms, with AUM of $7 tr.
For the first time, pricing trends for ESG data products are also included in the analysis.
Mike Carrodus, CEO of Substantive Research, said, “When we did the initial study in 2022 we were conscious we had a broadly representative survey universe, but were always curious as to how a more comprehensive dataset would influence our core conclusions. As more and more firms joined the project it became clear to us that we had only seen the tip of the iceberg.”
Overall findings on pricing inconsistencies include:
In the Index market:
- In our initial study (Oct 2022) the lowest to highest pricing for similar developed market index products showed that some providers were charging certain clients 13 times (1300%) more than other clients for similar products and services
- The updated data (Jan 2023) shows that some providers are charging certain clients more than 26 times (2632%) more than other clients for similar products and services
In the Ratings market:
- In the October study, the lowest to highest pricing for similar ratings products showed that some providers were charging certain clients over three times more than other clients for similar products and services
- The updated study in Jan 2023 shows that some providers are charging certain clients more than five and a half times more than other clients (562%) for similar products and services
The new study adds ESG providers into the data, with the following conclusions:
- Our latest survey shows that some providers are charging certain clients six times more than other clients (600%) for similar products and services – showing that the embedded pricing inconsistencies inherent in the traditional market data industry is being replicated in this fast-growing new area
These are prices charged by providers to different clients for comparable products and services.
Krystal Somaza, Head of Data & Analytics at Substantive Research, said, “Since we published our previous findings, we’ve welcomed a great deal more additional data from an enthusiastic market. This enlarged dataset has shown that pricing inconsistencies are not only widespread, but that there are even larger disparities out there in terms of what firms are paying the same vendors for similar market data products.”
Substantive Research solves a very specific challenge for Heads of Market Data globally, by shining a light onto the total lack of transparency around market data pricing and agreement structures. This opacity previously made it impossible for Heads of Market Data to know how efficiently they were running these sizable budgets, and whether they should focus their efforts on securing better terms.
In response to demand from its customer base, Substantive Research has created an industry-first “apples-to-apples” Market Data Spend Analytics service, which allows both buy-side and sell-side firms to truly understand and compare their market data payments and budgeting with the wider market and against their peers.
Mike Carrodus, CEO of Substantive Research, commented, “As part of its ongoing wholesale data market study, the FCA will shortly be sending out a comprehensive set of questionnaires to industry players to gather more information on the prevailing pricing climate in market data.
“While we know that the FCA findings will be published within a timeframe of 12 months, our data already offers transparency in this opaque marketplace, where an incumbent vendor base enjoys significant pricing power.”
He added, “Procurers of market data continue to focus on driving value in their budgets and we’re proud that our insights empower them to do just that.”
Substantive’s methodology provides an industry-first, standardised perspective for consumers of market data, which delivers the following conclusions:
- While pricing power is firmly in the hands of the sellers, best practice in negotiation delivers results. 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.
- Pricing inconsistency cannot be explained by differences in the clients’ structures, needs and requirements. These factors all drive pricing, but once these factors are all accounted for, prices still vary significantly.
- Even with a strong focus on standardisation and consistent pricing, vendors would struggle – they and their client base regularly go through mergers and acquisitions, the size of each client changes with market cycles and requirements have become more sophisticated from their client base.
Universe of survey data:
60 asset management firms, 60%/40% Europe/North America, Total AUM represented $7tr, 70%/30% Long-only/Hedge Fund.