The UK’s Financial Conduct Authority (FCA) has published the findings of its wholesale data market study – ruling out any “significant intervention” on the basis that firms are currently able to access the market data they need.
The wholesale market data study looked at competition in the markets for credit ratings, benchmarks and market data vendor services, focusing on UK domiciled wholesale data users such as asset managers and investment banks.
Sheldon Mills, executive director of consumers and competition, 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.”
The study looked at competition in 3 separate but interlinked markets: The provision of benchmarks across several asset classes, including equities, fixed income, commodities, foreign exchange and interest rates; the provision of credit ratings data by credit ratings agencies (CRAs) and their affiliates; and the provision of market data vendor (MDV) services related to the redistribution of wholesale data, including trade data, index data, credit rating data, reference data, pricing and valuation data.
Across all 3 markets, the FCA found evidence of, and drivers for, market power. “Users may be paying higher prices for the data they buy than if competition was working more effectively.”
The drivers were: concentrated markets; highly profitable key providers; the essential nature of the data; and limited competition. However, the FCA did not find evidence that firms cannot access the wholesale data they need.
“Our evidence suggests that firms buy the kind of data they need, and, in most cases, the data they buy is of sufficient quality to meet their needs.”
“For example, around 70% of benchmarks users reported no issues with quality, and 90% of credit ratings users were either positive or neutral when asked about their views on the accuracy or quality of ratings and related services provided by the top 3 credit ratings agencies (CRAs),” the report noted.
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