In the food chain between trading venues and buy side investors, data vendors and terminal providers are cutting themselves an increasing share of the revenue pie.
Market data price increases are outpacing client budgets, according to Substantive Research, with renewal fees rising at more than five times the rate of budgets.
The report follows a controversial report from Market Structure Partners earlier this month, which stated European exchanges were hiking market data prices to make up for poor market conditions. Exchanges cited in the paper, including LSEG, Deutsche Borse and Nasdaq Nordics, refuted the findings.
READ MORE: Buy side cries price gouging, exchanges say it’s a smokescreen
According to Substantive Research’s report, market data service renewal fee increases varied from 14-18% between 2022 and 2024. Clients’ market data budgets increased by 2.01-3%. This disparity could be preventing clients from upgrading their data service as often as they should, Substantive Research suggests.
Czarina Reinante, head of market data and ESG analytics at the company, commented: “Market data consumers are grappling with consistent annual cost increases. With hundreds of contracts being renewed each year, keeping track of all usage and renewals is a monumental challenge. Vendor negotiations, often stretching over months due to complex terms and opaque pricing models, add to the difficulty.
“In recent years, market data budgets have risen in line with inflation, but contract renewals have surged by a much larger margin. Firms are now faced with the tough choice of cutting usage to afford essential services. As costs continue to climb year after year, this situation becomes unsustainable.”
Index and rates data saw the greatest cost increases over the last five years.
Among index providers, while module prices were up by 5-7% each year, contract renewal costs increased by a quarter. Included in this price are the additions of new licences, the unbundling and rebundling of existing models into new packages to be purchased separately, and pricing driver and lever adjustments.
Between providers, these costs can vary drastically. Substantive Research noted that some clients were paying 12 times more than their peers for the same products and use cases. While this is a considerable difference, the disparity has improved from 2022 – when some clients were paying 26 times more than competitors for similar products.
The amount spent on ratings data increased by 9% in 2024, and by 45% between 2019 and 2024.
Index and rates data providers have remained tight-lipped on the report’s findings. S&P Dow Jones and Bloomberg did not respond to Global Trading’s requests for comment. LSEG declined to comment.
Terminal use continues to dominate the market data industry. Client budgets are up more than 20% for these products over the last five years, with Bloomberg seeing the greatest benefit. The company maintains its hold over the space, as illustrated by the integrality of the service to its profits; 80% of client spend to the company is allocated to the terminal.
By contrast, the three other vendors considered in the survey see between 17% and 30% of client spend go towards their terminal products.
Assessing price variation across terminal providers, Bloomberg was found to be consistent in its pricing. Across the remaining three providers, price variation had increased since the 2023 survey. The greatest discrepancy was a 590% difference.
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