Fixed Income Market Data Costs - The Burden Continues to Rise

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%).