The FCA views trade data as critical to the efficient functioning of UK markets and its study has found that the market is generally working well.

However, it has also identified some areas where competition amongst market players is not leading to outcomes that are as good as they should be. Problems driven primarily by a lack of competition in this market may, according to the regulator, potentially be harming UK investors, savers and having a detrimental impact on the attractiveness of the UK market as well as the ability of its market players to innovate.

A key concern for the FCA is connected to the concentration of trading on a limited number of large venues that act as central marketplaces for trading. The data generated by these venues is considered “must have” by market participants, but this lack of competitors means a lack of choice, which, in turn, can result in rapidly rising prices. The higher costs and inability to negotiate or switch is leading to some users being priced out and choosing to relinquish access to data altogether. Losing access to this data leads to suboptimal outcomes for firms as well as investors.

Pricing and licencing

The lack of competition also means that trade data providers do not have any incentive to simplify their complex, but highly profitable pricing and licensing structures.

The quality of freely available delayed data is poor with firms doing only the minimum necessary to comply with their regulatory obligations. Firms are not likely to improve delayed data quality on their own initiative because improvements could lead to creating an alternative to their highly profitable offerings. The FCA, on the other hand, seems keen on improvement because it views delayed data as “an important competitive constraint on the real-time data offerings of trade venues”.  

The FCA intends to address the issues that it has identified and is prioritising two projects in order to do so. In conjunction with the release of the trade data report, it is launching a wholesale data market study. The deadline for the submission of stakeholder views on this is 30 March 2023. The FCA expects to publish the market study report by 1 March 2024.

The FCA also intends to publish a discussion paper on a UK consolidated tape in the Summer 2023. A consolidated tape has been on the EU and US regulatory agenda for some time now, for all the reasons cited by the FCA in its report, but progress seems to be very slow.