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Derivatives market calls for change to market data fees

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Market data fees have increased by an average of between 50 and 100% over the past five years and almost half of sell-side organisations now spend more than $3m per year on market data, a wide-ranging study by Acuiti has found.

Acuiti’s research found that a typical mid-sized proprietary trading firm or hedge fund faces bills of between $25,000 and $50,000 a month, while the largest firms face faced outlays exceeding $250,000.

Over two-thirds of bank respondents reported their market data fees payable to exchanges to be in excess of $250,000 per month. Brokers and non-bank FCMs reported a broad spread of fees, with the smallest paying less than $10,000 and the largest spending more than $250,000 per month.

Acuiti surveyed senior executives at 112 firms from across the global derivatives markets and found that in addition to the rising costs, 82% of respondents said that their organisation found it hard to accurately forecast the costs of market data while 67% said that the costs of data had presented a major barrier to trading new markets or products.

The findings are contained in the Acuiti Market Data Review, which was released last week. The review also collected extensive comments from market participants on how to address the rising costs of market data.

“The commercialization of market data is an inevitable consequence of the demutualization of exchanges. However, fee increases are reaching the point at which they are unsustainable and preventing growth in the market,” said Will Mitting, founder and managing director of Acuiti.

“This report seeks to forge a path to a sustainable future for market data and contains a series of suggestions of measures that can be taken to mitigate concerns and lower the burden for market participants.

“With regulators in several jurisdictions taking a keen look at market data fees, it is in the interests of both the exchanges and their clients that market-led solutions are achieved before potentially more extreme measures are forced upon the market,” Mitting said.

The report found a general acceptance that market data is a commercial commodity and very few respondents called for them to be completely eradicated. However, the complexity of fee schedules, regularity of exchange audits and difficulties firms face in monitoring and reporting market data usage are key areas that the market wants addressed.

In addition to the section on Market Data, the report also features a series of customer reviews of real-time market data feed providers including Refinitiv, ICE Data Services, CQG, Bloomberg and several other providers as well as an indepth profile of client demand and investment intentions when it comes to third-party data feeds.