FESE welcomes the fact that the FCA’s call for input (CFI) takes into account the wider market data ecosystem, acknowledging that this discussion is not only relevant to exchanges but also to the entire value chain for market data. This is an important distinction as the market data offered by exchanges is part of a much larger value chain, in a broader market data industry that is expanding. Exchange market data is distributed directly or indirectly, via data vendors, to brokers, asset managers, and other market participants, and is only one of the market data sources used by market participants, which also includes news, alternative data, research, ratings, valuation data, reference data and so on. The consulting firm Oxera estimates that market data provided by European exchanges represents less than 0.5% of buy-side and 10% of sell-side of the total European spending on market data and analysis.
It is crucial to recognise the scale and nature of the market data value chain when considering the price of market data to the end-user. The market structure in which market data is produced and consumed is complex, making it challenging to assess the role and impact of regulatory intervention. FESE would also like to highlight upfront one key theme emerging out of the CFI questions on trading data. The CFI does not appear to fully appreciate the competitive constraints on trading data supply. Market data is an intrinsic part of the price formation process and is a joint product with trade execution, i.e. it is not possible to generate one without the other, most activities undertaken by an exchange deliver both trading and price formation. Exchanges face competitive constraints for trading/market data services which ensure that their trading/data fees must remain competitive.