The City watchdog will not launch a “significant intervention” into the trade data market, although it suggested that the market can be “improved”.
In an update on its investigation into the wholesale data market, the Financial Conduct Authority (FCA) ruled out major changes due to “potential unintended consequences”, such as the availability of data to market participants.
The City watchdog looked at access to benchmarks – a market dominated by FTSE Russell – as well as credit ratings and ‘market data vendor’ services, dominated by Bloomberg terminals.
However, the regulator identified areas across the market where competition “does not work well”.
“Users may be paying higher prices for the data they buy than if competition was working more effectively,” the FCA said. It said it will try and progress ideas to ensure trade data is available on fair and reasonable terms.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “Our market study found that firms can access the data they need to make effective investment decisions.”
“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,” he continued.
The investigation into the market was launched in March last year after the regulator found that competition in areas of the wholesale trade data market was not working “as it should”.
The market was heavily concentrated among a few firms meaning there is little choice for users, the regulator said, while switching was also not an easy option.
“MDVs play a key role in the distribution of trading data and other sources of market data such as benchmarks and CRA data. In 2022, the UK revenue of our sample of MDVs was around £3.0bn. Bloomberg is and has been historically the largest MDV followed by Refinitiv. Other smaller but significant MDVs are SPGMI, ICE and FactSet, followed by a long tail of smaller specialised providers. There have been no major entrants in the last five years, and exit has occurred mainly via mergers and acquisitions,” the review reads.
However, though concentrated, the FCA said the market was not worthy of a full investigation.
In an August update, the FCA said some features of the market “restrict or distort competition”.
Previous research from Substantive Research showed some institutions are paying over 26 times more than peers for the same data.
Firms could put up prices by as much as 50 per cent, even when the use cases remained the same, the research found.