Asset managers want to see lower data costs
When it comes to fees in the financial sector, one immediately thinks of the monthly costs for current accounts – and the often heated disputes about them. Consumer advocates criticise high fees, banks point to regulatory burdens, and legislators try to counteract this with models and caps.
But while the debate in the retail client segment is receiving widespread media attention, an even bigger dispute over fees is raging largely unnoticed by the general public – between asset managers and the equally powerful stock exchange operators. It's about something that seems inconspicuous at first glance: Data.
Specifically, it is about market data – i.e. real-time prices, trading volumes, order book depths or historical price data – which are essential for the functioning of modern capital markets. Investors, issuers, banks and fund companies rely on it to make investment decisions, assess risks or implement trading strategies. Especially in high-frequency and algorithmic trading, where milliseconds count, access to fast, accurate data is crucial. Accordingly, market data has long since become a key resource in the world of digital finance – and a coveted trading commodity.
Expensive, but indispensable
The importance of market data has increased enormously as a result of technological developments. Institutional investors, hedge funds and banks process huge amounts of data in real-time. The demand for low-latency, high-precision information is correspondingly high – and so are the prices. According to an analysis by Market Structure Partners (MSP), fees for market data on European stock exchanges have risen dramatically in some cases in recent years. Index providers, for example, have had to cope with price increases of between 97% and 170%.
This development is affecting a sector that is already suffering from margin pressure: providers of passive investment products in particular, who operate with minimal cost structures, are complaining about the increasing burden of rising data costs. And while the stock exchanges are talking about a fair price for a valuable product, asset managers and industry associations are calling for stricter rules. The suspicion is that the exchanges are exploiting their market power to dictate prices.
The actual size of the market data business remains unclear, but it is estimated that asset managers had a global spending volume of 50 billion dollars in 2024. The associations do not receive detailed data from their members because this is considered to be competitively sensitive. The only conclusion that can be drawn is that it is a huge business – but no one knows exactly how big.
MSP takes a look at Deutsche Börse and other exchanges. While transaction volume in equities trading fell by 29% between 2020 and 2023, overall revenues from the trading business only fell by 12%. There was a growing share of market data in total turnover – from 21% to 31%. Other large trading centres such as Euronext, Nasdaq Nordics or London Stock Exchange Group showed similar patterns.
Fee models are becoming increasingly complex
What is also fuelling the debate is the increasing lack of transparency in pricing structures. MSP criticises the fact that some exchanges have introduced multi-level fee models in which algorithmic traders or institutional investors have to pay significantly higher fees than simple data subscribers. For smaller market participants or new players, such structures could represent a barrier to market entry – or slow down innovation. The criticism is that the pricing is not economically motivated, but functions like a hidden tax on the capital markets.
Criticism of the status quo is becoming ever louder. „Asset managers are legally obliged to use stock market prices and market data. This is not a free decision – and with such oligopolistic structures, it is a case for the competition authorities,“ says Thomas Richter, Managing Director of the German Investment Funds Association (BVI). The association is therefore calling for a regulatory counterpart to the Data Act - an „EU Data Vendor Act“ to ensure fair conditions in the data market.
Stock exchanges defend themselves
Stock exchanges, on the other hand, point to the increased requirements for the production, storage and dissemination of data. They emphasise that considerable investments are necessary to fulfil regulatory requirements such as Mifid II, ensure cyber security and provide high-performance infrastructures. A study carried out on behalf of the Federation of European Securities Exchanges (Fese) by the consulting firm Oxera even concludes that the market data revenues of European stock exchanges have only grown by an average of around 3% per year – i.e. in line with inflation.
Fese also criticises the methodology of the MSP analysis: It compares exceptionally high trading volumes during the pandemic with phases of lower activity – a distorted picture. It also warns against regulatory intervention: A cap on fees could jeopardise innovation, make access to data more difficult for smaller providers and ultimately impair the competitiveness of European financial markets.
„There is no evidence that market data prices charged by exchanges such as DBAG have hindered market entry or competition between trading centres in any way,“ says Deutsche Börse.
Some market observers note that it is remarkable that an industry such as asset management, which traditionally favours less regulation, is calling for more state intervention, and views voluntary market mechanisms as failing.
„Price regulation is not the right tool, as it can have undesirable side effects, especially if it is applied comprehensively and without close scrutiny to entire sectors,“ said a Deutsche Börse spokesperson.
Data ticker as a way out?
One possible way out: The so-called Consolidated Tape (CT) – a centralised European price ticker for market data. The BVI supports the project: „The consolidated tape could form a counterweight to commercial data providers and ensure more competition", it says.
The EU Securities and Markets Authority (ESMA) is expected to announce at the beginning of July this year which financial services provider it will award the contract to provide a standardised data ticker for the bond market. According to ESMA's plans, the selected offer will then be reviewed and approved later this year.
The selection process for the standardised data ticker in equities trading will then start in June 2025, and the award process for a Consolidated Tape in derivatives trading will finally be initiated at the beginning of next year. In other words, the EU supervisory authority wants to gradually finalise the selection and approval of CT Providers (CTPs) for interest rate, equities and futures trading within the next 24 months.
It remains to be seen whether this plan will fulfil its promises. Critics warn of bureaucracy and high implementation costs. But at least the political will seems to be there.
