This paper provides a comprehensive view of the continuing rise in FI data costs since publication of our last such report, published in February 2022. We look again at the scale of the overall spend increase, what individual components are the main drivers of this increase as well as changes in the pace of increases of individual components and how these have impacted on the profile of overall spend. As previously, we have broken down the overall spend into 8 categories (terminals, pricing and reference data, exchange fees, research and analytics, data feeds, indices, ratings and other) from 6 types of providers (exchanges, MTFs, data vendors, brokers, ratings agencies, and index providers). In aggregate, the most notable, and concerning, aspect of the updated figures is that the characteristics and trends identified previously have persisted and, in some cases, actually accelerated. We find this to be particularly concerning in light of the position taken by the FCA in their wholesale market data study, published in February 2024, that ruled out making any significant intervention in the market. This was despite finding that competition was not working well in some areas and that, as a consequence, users may be paying higher prices than they would if competition “was working more effectively”. Across the sell side, growth in spend on overall (cross-market) market data actually accelerated. Costs grew by 25% between 2017 and 2021, a CAGR of 5.74%. Over 2022 and 2023 the annual rate of increase accelerated to 7.33% and reached an index value of 144 – a rise of 44% over 6 years. Looking at FI market data specifically, growth in spend continued to outpace the rate of growth in spend for overall market data, albeit with a smaller differential. Over the periods 2017-21 and 2022-23, FI spend increased at a CAGR of 10.7% and 7.7% respectively against increases in overall spend of 5.7% and 7.3% over the same periods. Separately, looking at growth in FI data spend vs growth in user numbers, again, growth in spend significantly outpaced growth in user numbers. Notwithstanding likely growth in usage per user, this metric suggests a continued increase in unit price. As noted above, over 2017-21 and 2022-23, annual growth in spend was 10.7% and 7.7% respectively whilst growth in users over the 2 periods was only 3.6% and 6.3%. Turning to individual spend components within the overall picture, the relative sizes of spend between components was broadly similar across the 2 periods. Some notable changes between the 2 periods were evidenced by a significant proportional increase in data feeds costs as well as a proportional decrease in spend on indices. Within this overall picture however were a number of eye-catching spend increases on individual components. Over the full 6 year period analysed, the most notable of these were Research & Analytics (110%), Ratings (75%) and Indices (57%).

Rising data fees to offset declining trading revenue burden market participants with surging costs Research by Market Structure Partners(MSP) reveals that European stock exchanges are increasingly turning to market data sales to compensate for adverse market conditions that should have resulted in a downturn in equity market revenues such as declining equity trading volumes, shrinking market share, and a diminishing customer base. This shift has dramatically driven up the cost of equity market data, which is essential for issuers, investors, and market intermediaries to conduct their daily business. The research, commissioned by a coalition of trade and other industry associations presents a critical analysis of how the equity market data business and fee structures of Europe’s largest exchanges (Deutsche Börse, Euronext, LSEG, Nasdaq Nordics and SIX Swiss Exchange Ltd) have evolved and how it stifles growth and innovation. Niki Beattie, CEO of MSPsaid “This Study shows the ease with which exchanges can rely on market data income to supplement what should otherwise be a natural decline in revenue and suggests that, as a result, market growth has become a secondary objective.European policymakers with competitiveness and innovation agendas should rigorously challenge the current separation of trading and data revenues at all trading venues.” Total equity market revenues consist of trading revenue and market data revenue combined. However, the market data pricing does not appear to align with the trading activity it underpins. Despite these adverse conditions, EU regulatory disclosures from Europe’s largest exchanges show that they appear able to sustain overall equity market revenues by increasing the portion that they generate from market data as trading revenues decrease. For example: Transacted value on Euronext’s equity markets reduced by 17% between 2020 and 2023. However, the total equity market revenue only declined by 0.5%. This is because market data revenues as a proportion of overall revenue increased from 11% to 19%. Transacted value on at Deutsche Börse’s equity markets reduced by 29% between 2020 and 2023. However, equity market revenue only declined 12%. This is because market data revenues as a proportion of overall revenue increased from 21% to 31%. Transacted value on Nasdaq Nordics’ equity markets reduced by 26.9% between 2021 and 2023. However, the total equity market revenue only declined by 8.8%. This is because market data revenues increased from 19% to 23%. LSEG only has to make regulatory disclosures for its EU subsidiary, Turquoise. Trading turnover on Turquoise significantly reduced between 2020 and 2022, some of which can be attributed to its sale of Borsa Italiana in 2021. Nevertheless, during the same period, market data as a percentage of overall equity revenue rose from 10.5% to 27%. These increases in market data revenue have occurred even though there are no specific costs for producing market data and the costs of running a trading platform, such as software, hardware, energy prices and other factors are stable or declining. Additionally, exchanges in the UK and Europe have run the same trading technology for more than a decade and there is no evidence of any significant expenditure in their accounts. Costs for disseminating data across the market are borne by third parties. The research argues that, exchanges have managed to maintain revenues by charging higher prices to fewer participants for more limited data. This appears to have been achieved through the introduction of arbitrary and complex fee structures that are based on multiple factors including: user type (broker/agent), competitive status, professional versus retail users, data consumption method (human use on display terminals versus machine use of non-display data), and number of devices that may be able to see the data. Restrictive clauses also limit data use to exchanges' predefined purposes, making it hard for innovators to use data without taking on indeterminate financial risk. As a result, every firm and user has a different cost profile and, if an exchange lowers prices for one set of customers, it may offset the revenue loss by raising prices for other customers. The pricing model has led to extraordinary price increases, particularly as exchanges appear to seek to stem losses that arise that result from their customers’ increasing automation. Most dramatically, under certain conditions, it is now 35 to 97 times more expensive in 2024 for a machine to use data compared to the cost for a human to use the same data for the same activities in 2017. Additionally, according to the research, firms that compete with traditional stock exchanges, either as trading venues or index providers are amongst those that have seen the most dramatic price increases. Competing trading platforms have seen costs rise by up to 481% between 2017 and 2024, while proprietary index creators that compete with exchange owned indices experienced cost rises between 97% and 170% across three exchanges over the same period. Since the introduction of MiFID I in 2007, these exchanges have collectively earned at least £5.67 billion from market data, justifying their pricing as essential for the maintenance of fair and orderly markets but other competing trading venues have managed to become profitable and process similar volumes in a fair and orderly manner without the same reliance on market data revenues. If market data costs were directly correlated to market share, the study finds that exchanges, leveraging their incumbent status, could have generated up to £4.93 billion (€5.83 billion) in surplus revenue from market data fees since 2008. Alternatively, they could be earning up to 7.64 times more than competitors for processing similar volumes and market share. The research raises critical questions about exchanges' role in regulated markets including: whether they are truly serving the equity market community, whether they are investing in equity market development and whether regulation has kept pace with the evolving business models and interests of exchanges where equity markets are now a minority business. Ultimately, the Study argues that market data's value must align directly with trading activity. It calls for regulation to ensure data is treated as a by-product of trading by all trading venues rather than a separate revenue stream. Failing that, legislative intervention should redefine all trading venues’ objectives to ensure they support market growth as their primary objective explicitly. Once the transparency of exchange data fees is improved, it will be easier to understand the pricing of data dissemination imposed by third party data vendors within the value chain. "This study reveals a concerning trend in European equity markets," saidMike Bellaro, CEO of Plato Partnership. "When essential market data becomes disproportionately expensive, it creates barriers to entry and stifles the very innovation that policymakers are trying to encourage. This is particularly relevant as the UK and European Union seek to enhance their market competitiveness." Adam Farkas, CEO of AFME, said: “Accessible market data is a critical component of healthy and well-functioning capital markets. Irrespective of the asset class, data empowers and allows all market participants to make informed decisions when allocating capital which in turn, supports a competitive and growing capital market. We thank Market Structure Partners for undertaking this critical research which shows that the much-needed growth in Europe may be undermined if attention is not paid to these concerning developments”. Thomas Richter, CEOof the German Investment Funds Association,BVI, said: “Asset managersare legally forced to usestockmarketprices, benchmarks, credit ratings, and other datafrom third-party providers.Because of the existing oligopolymarket structures with only a few providers per segment, there is a case for competition law authorities.We call for an EU data vendor act that regulates the commercial behaviour of these entities.Because if we don't, the already considerable cost pressure in thefundindustry will intensify even further – also to the disadvantage of the consumers.” Tanguy van de Werve, Director General of EFAMA, said: “Competitiveness is high on the policy agenda, including boosting the competitiveness of EU capital markets. Addressing the harmful impact of the oligopoly at the heart of market data access would lower trading costs, encourage new market entrants, and promote innovation. EU capital markets are underperforming their global peers, a trend that has only solidified over the last few years. Tackling high market data costs should be an obvious choice for policymakers looking to reinvigorate European capital markets.” Piebe Teeboom, Secretary General of the FIA EPTAsaid, “The MSP report evidences the ongoing increase in the cost of market data over recent years. This adds significant cost to participating in European financial markets, at a time when Europe is focussed on finding ways of boosting growth and competitiveness. In the interests of ensuring Europe remains an attractive destination for capital allocation, we encourage policy-makers and regulators to consider how the report’s findings impact these objectives.”

AFME and Oliver Wyman have published a new report providing practical input and recommendations to improve the usability of the EU Taxonomy. The report provides an “on-the-ground” perspective of the challenges which financial institutions face in applying the Do-No-Significant-Harm (DNSH) assessment. Drawing on research conducted by Oliver Wyman, including detailed interviews with practitioners at financial institutions, corporates, sovereign and supranational organisations and investors, the report sheds light on real-world complexities. Specifically, the report explores how the DNSH assessment could bestreamlined across credit institutions’ financingportfolios with a mixture of short-, medium- and long-term policy actions. This report provides recommendations for policymakers to help ease the implementation of the DNSH component of the EU Taxonomy in a comparably short timeframe. It aggregates industry best practices to help users cope with challenges and contributes to a repository of effective strategies, policies, and frameworks for EU Taxonomy users in the financial and non-financial sectors.

Financial institutions continue to face a complex, continually evolving regulatory framework on sustainable finance and managing ESG risks. In light of the rapid rate of change and regulation increasingly taking effect, AFME is pleased to renew our partnership with Linklaters and publish an update to our report “Sustainable Finance in Europe: Regulatory State of Play” which was first published in 2021 and last updated in March 2023. This report reviews the latest developments and their impact on banks and capital markets, providing a practical guide to the wide range of initiatives in the EU, UK and Switzerland. As of December 2024, the key building blocks of EU sustainable finance legislation are in place, including the EU Taxonomy, Corporate Sustainability Reporting Directive (CSRD), EU Banking Package, the Corporate Sustainability Due Diligence Directive (CS3D) and the Sustainable Finance Disclosure Regulation (SFDR). Banks are focusing on implementation and are preparing their first year’s reporting under the CSRD’s European Sustainability Reporting Standards (ESRS), having published their first EU Taxonomy alignment reporting in 2024. In the UK, 2024 marked a resurgence of ambition in sustainable finance regulation with a new government announcing a new sustainable finance package, the FCA’s Sustainability Disclosure Requirements (SDR) regime and anti-greenwashing rule taking effect, and announcements regarding the adoption of ISSB standards, the development of a UK Green Taxonomy, legislation regulating ESG ratings providers and the findings of the Transition Finance Market Review. AFME continues to support members as they navigate the continually evolving regulatory framework, led through our Sustainable Finance Steering Committee and dedicated working groups. We also highlight the experiences of our members through our policy engagement and consultation submissions. Our annual European Sustainable Finance conference brings together the financial services community with policymakers to evaluate the practical implementation of sustainable finance regulation across Europe and discuss what the future brings.

AFME has today published theCapital Markets in the UK Key Performance Indicatorsreport. This report is an extension of the seventh edition of AFME’s annualCapital Markets Union Key Performance Indicatorsreport, which tracks the development of the European capital markets ecosystem. The purpose of this report is to assess the UK’s progress in enhancing and expanding its capital markets against a set of benchmark indicators. We group our eight indicators into four areas which seek to measure the various features needed to develop an efficient, deep, and interconnected capital market, namely: Access to capital Availability of pools of capital for investment Transition to sustainable finance and digitalisation Efficiency of capital markets ecosystem and integration We compare the evolution of the UK’s capital market, according to our indicators, with other global regional peers such as the United States (US), China, the European Union (EU), Japan, Australia, and some selected EU Member States. Key findings This report demonstrates that the UK remains one of the leading global financial centres, however for the second consecutive year the gap between the UK and other markets continues to narrow. There remain positive indications that the UK can continue to use the advantage that exists, and the capacity that exists, to drive future growth and expand key areas such as financial technology and sustainable finance. UK capital markets have maintained their role as a pivotal hub for capital market funding. Over the past three years, UK corporates have raised a quarter of their funding via public markets. Despite the challenges faced in 2022, capital markets issuance for UK non-financial corporates experienced growth in 2024, continuing the recovery from 2023. However, a longer-term perspective reveals a significant downward trend over the past decade, with convertibles and IPO issuances declining by over 90%, and follow-on issuances decreasing by 30%. Delistings have remained consistent, averaging around 200 annually since 2019. The ability of small and medium-sized enterprises to secure equity risk financing is crucial, with the funding gap between the US and UK increasing by nearly a third to 0.36% of GDP compared to 2023. Despite a slowdown in the addition of new unicorns, the UK holds the position of having the fourth largest number of unicorns globally. UK households continue to have substantial savings invested in capital markets instruments, amounting to 145% of GDP. However, UK issuers have seen a decline in their position as originators of green bonds within Europe, falling to the fifth place from third in 2023. The UK continues to be a global and regional hub for FinTech companies, driven by innovative ideas, a supportive regulatory environment, and high levels of funding. Nevertheless, the UK might be losing its competitive edge in the FinTech sector, particularly in the emerging field of tokenised securities. Over the last two decades, the UK equity market has been consistently declining, now representing only 3.4% of the world’s market capitalisation in 2024. Additionally, the securitisation market in the UK remains underdeveloped and underutilised compared to other regions, presenting a substantial potential for growth and expansion.

The Association for Financial Markets in Europe (AFME) has published a new report entitled “AFME priorities for banking regulation for the new EU legislative cycle.” The financial system is critical to the functioning of the EU economy and banks play a key role in supporting it. In a context where Europe is facing urgent and transformational challenges, financial markets need to upgrade their ability to meet generational investment needs. As stressed by prominent voices in recent weeks, promoting financial stability and the resilience of banks should not mean setting aside the need to ensure the competitiveness of the financial sector. Several factors contribute to the reduced competitiveness of banks. In this paper we identify some of the issues that deserve consideration in the coming months. Longer term themes are also covered in this paper. With the implementation of the Basel III standards and following more than 15 years of comprehensive regulatory reform, the EU’s banking regulatory framework finds itself at an inflection point. Increasingly stricter prudential requirements cannot be considered the solution to every problem. A more risk sensitive approach is necessary, where a stocktake of the framework leads to targeted changes focused on achieving EU common goals related to the financing needs of the EU’s consumers, corporates and overall global competitive standing. The rise of geopolitical tensions and jurisdictional fragmentations make this an economic imperative. The new EU policy cycle provides an opportunity to assess the current regulatory framework to align it with the EU’s broader strategic objectives. This should be done with the objective of enabling all banks operating in the EU to remain competitive in an increasingly fragmented global landscape.

Press releaseavailable inEnglish,French,German,Italian,Spanish Individual country analysis available forFrance,Germany,Italy,Spain The Association for Financial Markets in Europe (AFME), in collaboration with eleven other European and international organisations, has today published the seventh edition of the “Capital Markets Union – Key Performance Indicators” report, tracking the progress of Europe’s capital markets against nine key performance indicators and analysing the progress over the past seven years. Among the key findings of the 2024 report on European capital markets’ performance: EU Capital Markets Falling Behind: Despite some cyclical gains, the EU lags behind the US, UK, and China in most key indicators, such as access to capital, global interconnectedness, and market liquidity. The EU’s capital markets remain fragmented, undermining economic competitiveness on a global scale. ESG Leadership, but Growth Slowing: The EU continues to lead in sustainable finance, with ESG bonds accounting for 13% of total bond issuance in 2024, ahead of the US and UK. However, growth in EU ESG issuance has not kept pace with growth in non-ESG issuance, with the overall share of ESG issuance down from 15% in 2021, signalling a potential plateau. Deteriorating Intra-EU Integration: The report highlights a worrying decline in financial integration within the EU, a trend also noted by the European Central Bank. This fragmentation threatens the EU's overall financial stability and its ability to compete globally. EU Securitisation Market Remains Underdeveloped: The EU securitisation market continues to trail behind those of the US, UK, and Australia. Currently, only 1.9% of outstanding EU loans are transformed into securitised vehicles or loan sales, compared to 7% in the US, 2.8% in Australia, and 2.2% in the UK. Issuers from only 9 of the 27 EU member states utilised securitisation as a source of funding in the first half of 2024. Widening Market Disparities: Northern European nations, such as Luxembourg and the Netherlands, boast deeper capital markets and greater access to finance, while countries in Eastern Europe lag behind. This disparity poses a significant challenge to the EU’s ambition for an integrated capital market. EU FinTech Ecosystem Stalling: Private investment in EU FinTech remains lower than in the US and UK, limiting the region’s progress in digital finance. However, the EU has taken a leadership position in the issuance of tokenised bonds, accounting for 20% of the global market in this emerging area.

AFME is pleased to partner with Linklaters in helping financial institutions navigate and implement regulatory requirementsas it relates to MiFIR/D II. Our publication covers key changes in secondary capital markets in both the EU and UK. We have analysed the key regulatory and implementation issues related to areas suchas market structure, transparency, market data, consolidated tape, investment research and execution of client orders. Our guide is primarily written for sell side firms operating in wholesale secondary markets, however, it may be of wider interest to other market participants.

AFME is pleased to have supported a comprehensive study highlightinga number of significant data gaps that might undermine the efficiency and integrity of fixed income markets across the UK and EU. The research was undertaken collaboratively by FINBOURNE Technology, AdamantiaAdvisory and Propellant Digital, and supported by AFME, BVI and EFAMA.

The AFME-led European T+1 Industry Task Force is pleased to share a report titled "High-level Roadmap for Adoption of T+1 in EU Securities Markets."