Banks and brokers support recent moves by regulators to tackle high market data fees, according to Acuiti’s latest quarterly sell side execution management insight.
The report, which surveys Acuiti sell side execution expert network of senior executives in execution roles across banks and brokers globally, examines lessons learnt last year.
It also incudes a separate section on market data, and a deep-dive on innovation in sell side execution, produced in partnership with Horizon Software.
It revealed that 47% thought that market data costs were “far too high”, with the remainder claiming they were too high.
Members of the expert network favoured a regulatory response to the rising costs, with 58% backing a requirement for venues to disclose the costs involved in producing market data and then imposing mandatory limits on mark-ups.
Moreover, 54% called for a simplification of licenses to end the need to audit firms on usage, while half said that contracts should be standardiesd across the industry.
The calls come in the wake of recent increases in market data fees levied by exchanges and other trading venues.
It is also on regulators’ agenda. The Financial Conduct Authority recently launched a study of the wholesale market data industry including benchmarks, ratings and vendor services after raising concerns about costs to users.
Fees for market data were widely introduced in the wake of lower volumes in the early 2010s as central banks support for markets reduced volatility.
“The findings of the Acuiti Sell-Side Execution Management Insight Report highlight the increasing challenges facing sell-side firms in managing market data costs and improving automation and optimisation,” said Sylvain Thieullent, CEO of Horizon Software.
As for innovation, the expert network pointed to the development of algorithms and increased use of artificial intelligence as the two key areas that they expected to bring greater efficiencies to the market.
For many execution desks, attention on algo functions is moving beyond market impact, where product development is already mature.
Banks and brokers said they are interested in algos that drive operational and administrative efficiency — being applied to functions that can bunch or cancel and replace orders, where manual intervention is still widespread.
However, they believe there is currently significant room for improvement in optimization across the sell-side.
This particularly the case with pricing, pre-trade risk, real-time P&L and post-trade due to the lower levels of automation and optimisation.
Members of the network also reported challenges in securing budgets for investment in optimisation while at the same time expressing concerns over wholesale system replacement.
Ross Lancaster, head of Research at Acuiti, said: they “are seeking cost-effective ways of increasing optimisation and automation without the risk, cost and complexity of a large scale overhaul of their technology infrastructure.”
He added, “Less than a fifth of the network said that their currently technology infrastructure made it easy to bring new products and services to market quickly, while a strong majority favoured incremental investments in technology over wholesale replacement.”
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