The Association for Financial Markets in Europe (AFME) has published a new report, commissioned from Expand Research LLP, which finds that the cost associated with fixed income market data has soared between 2017-2021, increasing by 50%. This has been driven by price increases of 35% on the existing cost base and new, incremental usage which accounts for an additional 15% of spend. This is compared to a 25% price increase for sell-side market data more generally. Fixed income data costs are therefore rising much faster than the average cost of overall market data.
The report, “The Rising Cost of European Fixed Income Market Data”, identifies the sources of rising market data costs within fixed income markets and proposes solutions to encourage greater liquidity, efficiencies and growth in European markets, which play a critical role in providing funding for governments and corporates.
- Costs in all categories have increased, with the composition of data spend significantly different than for equities. Buyside costs have also increased significantly. Figure 3 of the report demonstrates that costs have increased regardless of the number of market data users and is driven by price increases and changes to charging structures. Figure 3 also demonstrates that the cost of sourcing the data is rising yearly and the trend is likely to continue, steepening the trajectory further.
- As a result, increasing market data costs are likely to have forced some consumers to scale back their data purchase to a minimum and often to economically suboptimal levels. In some cases, it could lead to strategic decisions to withdraw from specific markets.
- The report identifies a first step to achieving more reasonable fixed income data costs is to establish and apply a set of industry developed standards to fixed income market data across the industry. These should cover:
- Standardised pricing models for purchasing data from all vendors.
- Uniform formats in which the data is stored and provided to firms.
- A consistent procedure for accessing the data.