Global principles must be implemented to effectively address high market data fees and unfair licensing provisions, according to a new report on market data costs.
Authored by the European Fund and Asset Management Association (EFAMA), International Council of Securities Associations (ICSA), and Managed Funds Association (MFA), the report recognised that the uncompetitive conditions of trading venues were the motivation for high data prices.
In order to effectively address this, the report suggests three core principles in subjecting market data costs, such as market data pricing, licensing practices, audit procedures and connectivity fees, to full regulatory inspection.
Firstly, the report recommended that the price of market data and connectivity be based on the costs of data production and distribution, with a measure against a recognised cost benchmark; secondly, trading venues must standardise key market data contract definitions, terms, and interpretations; and thirdly, market data licensing contracts should be simplified to ease administrative burdens to broker-dealers and avoid unnecessary audits.
David Lynch, chairman of ICSA, commented: “The efficiency of the capital markets in meeting the needs of its many business and investor users, as well as the broader economy, depends on the cost and quality of information that is available to them.? The recommended principles recognise this and promote outcomes that are fair for all involved.”
Bryan Corbett, president and CEO of MFA, continued: “Excessive market data fees harm investors and their beneficiaries, including pension funds who require reliable returns to fund workers’ retirement. Access to market data enables investors to participate in capital markets, increases liquidity, and better serves all market participants.”
Tanguy van de Werve, director general of EFAMA, added: “The increased cost of data is forcing many asset managers to significantly scale back data purchases. This leads to less informed markets and decreased competition. The high cost of data also negatively affects the net performance of investment funds and, by way of consequence, the return to investors. The recommended principles help remedy this situation and address those concerns.”
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