We were delighted to be invited to present to the members of the BVI German Investment Funds Association on March 8th, highlighting pricing inconsistency in the market data industry. After our presentation there was a panel on licensing and agreements in this market, followed by presentations from key consumer groups as well as representatives from the legal profession. Our 5 key takeaways from the presentations and wider discussions around the event were:
- Market data consumers (e.g. Buy-Side firms) understand that as requirements increase from the market providers and venues need to price appropriately – however the opacity and lack of standardization in licensing and agreements lead to inconsistency in pricing and contracts, and that is less acceptable.
- Regulators are now putting these markets in focus, which is creating some optimism for the future state of the market. The wish list from consumers includes a more explicit connection to cost based pricing instead of value based pricing, as well as potentially requiring providers to complete Value Based Assessments similar to those completed by UK fund managers annually.
- Education in market data control and accountability reaps rewards. This involves engaging more firms within the key consumer groups so they can share best practices, but also within organizations themselves. Producing materials in written and video formats that are mandatory for anyone consuming market data ensures that they understand that if they consume outside of license limits they are potentially creating risk and cost.
- Resistance is not futile. It can be dispiriting to be negotiating in a market where it feels like the provider always has the leverage. However, a combination of best practice in control, plus greater understanding of pricing inconsistency, options and detail on the legal side, added to senior management buy-in and support when a stronger stance is necessary, all create better outcomes even before any new helpful regulations are introduced.
- Engagement with peers as well as the regulators and associations is key. There are key meetings throughout 2023 run by consumer groups and buy side associations, and the FCA and European regulators are all welcoming input right now, particularly the FCA with its Wholesale Market Study. It will be an interesting year!
Our thanks to the BVI German Investment Funds Association once again for inviting us, and all the best for their follow up day on March 14th on the wider topic of market data control!