Rising Market Data Costs Threaten Innovation and Growth in European Equity Markets, New Report Finds

Rising Market Data Costs Threaten Innovation and Growth in European Equity Markets, New Report Finds

(IN BRIEF) A new report from Market Structure Partners (MSP) reveals that European stock exchanges are increasingly relying on market data sales to offset declining trading revenues, resulting in rising costs for equity market data. Despite reduced trading volumes, exchanges like Deutsche Börse and Euronext have been able to maintain overall revenues by increasing the share derived from market data. The research highlights concerns over the complexity and arbitrariness of data pricing, which disproportionately burdens market participants, especially alternative trading platforms and index providers. The study calls for regulatory changes to ensure market data is treated as a by-product of trading, rather than a separate revenue stream, to promote market growth and innovation.

(PRESS RELEASE) LONDON, 4-Feb-2025 — /EuropaWire/ — A new report from Market Structure Partners (MSP) highlights the growing reliance of European stock exchanges on market data sales to counteract declining trading revenues, significantly driving up the cost of equity market data. This trend is being fueled by a combination of shrinking trading volumes, decreasing market share, and a dwindling customer base. While market data is essential for issuers, investors, and intermediaries, the rising costs associated with it are creating financial burdens for market participants. The research, commissioned by a coalition of trade associations, analyzes the evolving fee structures and practices of Europe’s largest exchanges (Deutsche Börse, Euronext, LSEG, Nasdaq Nordics, and SIX Swiss Exchange Ltd), revealing how these shifts are impeding market growth and innovation.

Niki Beattie, CEO of MSP, noted, “This study clearly shows how exchanges are increasingly relying on market data revenue to sustain their overall business models, making market growth a secondary objective. European policymakers should address the growing separation of trading and data revenues to foster competitiveness and innovation across trading venues.”

The findings indicate that, despite a decrease in traded volumes, the total equity market revenues in Europe have remained relatively stable due to the increasing share of revenue generated from market data. For example, Euronext saw a 17% drop in transacted value between 2020 and 2023 but managed to keep equity market revenue down by just 0.5%, thanks to a rise in market data’s contribution from 11% to 19%. Similar trends were observed at Deutsche Börse, Nasdaq Nordics, and LSEG, where the share of market data revenue has steadily increased as trading revenues fell.

The report further criticizes the complex and arbitrary pricing structures imposed by exchanges, which charge higher fees to a smaller pool of participants for more limited data. This pricing model, coupled with restrictive clauses on data usage, has led to extraordinary cost increases, with machines now paying up to 97 times more for data than human users. The increased data costs are particularly burdensome for competitors of traditional exchanges, such as alternative trading platforms and index providers, where fees have soared by up to 481% since 2017.

Despite these challenges, the research reveals that exchanges have managed to sustain revenues through the growing reliance on market data, even though the cost of providing it is not aligned with the actual trading activity it supports. The study calls for regulation to ensure market data is treated as a by-product of trading and not a separate revenue stream, and urges legislative intervention to make market growth a primary objective for exchanges.

Industry leaders are echoing these concerns. Mike Bellaro, CEO of Plato Partnership, warned that excessively high data costs are creating barriers to entry and stifling innovation, undermining the competitiveness of European markets. Adam Farkas, CEO of AFME, emphasized the crucial role of accessible market data in supporting healthy, competitive capital markets. Additionally, Tanguy van de Werve, Director General of EFAMA, highlighted that addressing the cost of market data is essential for enhancing the competitiveness of EU capital markets.

The report from MSP underscores the need for greater transparency and reform in market data pricing to ensure a more competitive and innovative market landscape in Europe.

Media Contact:

Rebecca O’Neill

Head of Communications and Marketing (Interim)

+44 (0) 7386 658 525
SOURCE: AFME
Follow EuropaWire on Google News
EDITOR'S PICK:

Comments are closed.