The financial industry’s escalating reliance on high-quality data is accompanied by significant cost implications, deepening the divide between firms with robust access to critical market data and those without.
Mike Poole, head of trading at Jupiter Asset Management, highlighted this disparity: “Not everyone has the same access to critical data, and that disparity directly influences trading behaviours and venue choice.”
Recent studies have underscored the severity of rising market data costs. According to Substantive Research, average renewal increases for major vendors fluctuated between 14% and 18% from 2022 to 2024, while annual market data budgets saw only modest growth of approximately 2% during the same period. This disparity suggests that firms are grappling with consistent annual cost increases that outpace their budgetary expansions.
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Index and ratings data have experienced particularly steep price hikes. For instance, some clients have been charged up to 12 times more than their peers for identical products and use cases, highlighting significant pricing inconsistencies within the industry.
The rising cost of market data and research, especially in the context of research unbundling under MiFID II, has sparked considerable debate. Giulia Pecce, head of secondary capital markets and wholesale investor protection at AFME, expressed concerns over the escalating financial burdens firms now face. She noted: “The FCA draft rules on payment optionality last year were quite prescriptive, and we provided feedback that more flexibility was needed for the new regime to meet its ambition.”
Pecce further emphasised the complexity of the evolving regulatory landscape, pointing out emerging disparities between the UK’s and the EU’s approaches to market data and research costs. She stated: “There is some divergence between EU and UK rules. However, our view is that the changes introduced in the two geographies are sufficiently aligned to allow firms to adopt the new payment options if they choose to do so.”
During a panel discussing the future of information in financial markets, the growing tension between human-produced research and machine-driven analytics was identified as a catalyst for change in the shifting economics of trading operations. Mike Carrodus, CEO of Substantive Research, noted the industry’s increased spending on data even as traditional research budgets shrink. He remarked: “Data is such an important currency now; it’s transforming processes and market practices.” Regarding the associated costs, he added: “We’ve seen declining research budgets juxtaposed against significant increases in data pricing for indexes, ESG, terminals and ratings —14% to 15% higher in the past year alone.”
These changes have broader implications, particularly for smaller market participants who may struggle to justify increased spending on market data and research through commission sharing agreements (CSAs). As firms reassess their strategies, the role of technology providers and data aggregators becomes more crucial, offering potential solutions for managing these costs.
Ultimately, the critical question facing market participants and regulators alike is clear: who will bear all these escalating data costs, and how sustainable is the current trajectory? As Pecce succinctly concluded: “We were pleased to see that the rules, as finalized by the FCA, provided additional flexibility, which is important to maximize the chances that the new payment option is adopted.”
