Investment industry calls for curbs on market data costs

IIAC among global alliance calling for action to protect investors from being priced-out of vital market intelligence

Investment industry calls for curbs on market data costs
Steve Randall

Investors should be protected from rising costs of market data, which is controlled by trading venues, according to industry bodies.

The Investment Industry Association of Canada is among the group of industry organizations calling for the implementation of internationally recognized principles to address excessively high market data fees and unfair licensing provisions. 

As the trading venues – exchanges and alternative trading systems – have unrivalled access to market data, effectively creating a monopoly on the market data generated, the industry says investors are disadvantaged by rising costs.

“Retail and institutional investors alike need access to market data in order to value their portfolios and achieve best execution,” said Ian Russell, IIAC President and CEO. “Exorbitant market data fees for required data have significantly increased the cost of operations, leading to a less informed market environment, reduced transparency, and overall less efficient financial markets.”

IIAC and other global securities and investment industry associations globally, want costs – including market data pricing, licensing practices, definitions, audit procedures and connectivity fees – to be fully scrutinized by regulators.

This scrutiny is based on three core principles:

  1. The price of market data and connectivity should be based on the costs of producing and distributing the data with a reasonable mark-up and measured against a recognized cost bench-mark.
  • Regulators should require trading venues to submit detailed cost and revenue figures in order to understand the mark-up imposed by exchanges.
  • Pricing of market data should only differentiate between professional and non-professional users to simplify pricing structure.
  1. Trading venues should standardize key market data contract definitions, terms and interpretations. Standardized agreements should be subject to regulatory review.
  2. Market data licensing contracts should be simplified to ease the administration burden for broker-dealers and avoid unnecessary audits.