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Battle erupts between traders, exchanges over data access fees

Trading venues have clubbed together to attack the latest European effort to curb what they charge clients for data.

The World Federation of Exchanges, which represents hundreds of trading venues including the London Stock Exchange Group and Deutsche Boerse, said in a letter to European regulators that their data is a valuable tool for traders, despite complaints about high prices and aggressive sales tactics.

Plans to regulate prices and force exchanges to open up their data on a so-called consolidated tape “may give rise to a loss of competitiveness of EU stock markets,” the letter published Monday states. “Exchanges must retain their ability to commercialize their data. To do otherwise would be draconian compared to other major markets.”

Last year, major EU exchanges made 245 million euros in revenues from market data, a fraction of the trading revenues generated by banks using the information, the WFE said.

The European Securities and Markets Authority opened a consultation in July on new ways to cut the cost of market data after earlier initiatives failed to curb prices. The MiFID II regulations, designed to improve transparency and lower costs, may have resulted in higher fees and created new ones, including charges for market abuse monitoring data, ESMA has said.

The U.K. Financial Conduct Authority, meanwhile, on Monday said that while Brexit has delayed its work on the topic, the regulator intends to scrutinize capital markets to ensure firms have timely access to data and larger firms can’t use their heft to weaken competition.

An employee views a FTSE 100 share index board in the atrium of the London Stock Exchange Group Plc's offices in London, U.K., on Wednesday, May 29, 2019. While the FTSE 100 Index has climbed about 15 percent since June 2016 in local currency, it's down in both euro and dollar terms. Photographer: Luke MacGregor/Bloomberg
An employee views a FTSE 100 share index board in the atrium of the London Stock Exchange Group's offices in London, on May 29, 2019.

Responding to ESMA’s consultation, the European Principal Traders Association questioned whether capital markets are sufficiently robust in light of the “intensifying horizontal and vertical consolidation we are currently witnessing.” The comments from the group, which represents firms including Citadel Securities Europe Ltd., come weeks after the LSE made a $27 billion bid for Refinitiv, which would combine a major creator of data with a distributor.

The Investment Association, a lobby group for asset managers, said that “exchanges currently exist as an oligopoly,” resulting in significant price increases. It said its members report “aggressive negotiating behavior” by market data vendors.

The Association for Financial Markets in Europe used its response to the consultation to attack the LSE for a lack of pricing transparency, saying users can’t tell how much of their fees go to operate the trading platform and how much pays for the data they receive.

Bloomberg News