Banks open fixed income front in Europe’s data price battle

Workers walk to work during the morning rush hour in the financial district of Canary Wharf in London, Britain January 26, 2017. REUTERS/Eddie Keogh/File Photo

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LONDON, Feb 3 (Reuters) – The price of bond market data has risen by half over the past five years, potentially prompting some users to exit the market and hurting liquidity, the AFME said on Thursday.

Big banks and asset managers are already saying equity trading data is too expensive – a complaint dismissed by stock exchanges – and the Association of Financial Markets in Europe (AFME) is now also targeting data costs on fixed income securities.

The European Union, keen to deepen its capital market following Britain’s departure from the bloc, has proposed a “consolidated band” that brings together and provides access to real-time bond and stock transactions to increase liquidity and transparency.

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Britain has also launched a bond band scheme, but band itself will not solve fundamental data cost issues, AFME chief executive Adam Farkas said in a statement.

“If left unchecked, some market participants may be forced to minimize their data purchases. In some cases, this could also lead to strategic decisions to exit certain markets,” Farkas said.

AFME commissioned a report from Expand Research on fixed income data pricing, using information from 10 major market makers, all AFME members, and other sources.

Costs increased regardless of the number of market users and are driven by price increases and changes in pricing structures, according to the report.

The cost of fixed-income data, used by market participants to find the best deals in the market for clients, has risen faster than for equity data, he said.

AFME Fixed Income Cost Chart

Banking industry complaints about stock price data have focused on exchanges, but the AFME report says fixed-income securities rely more on off-exchange pricing data from terminals, as well as the research and analysis.

AFME said it wants standardized pricing models for purchasing data, uniform storage formats and consistent procedures for accessing data.

Britain’s Financial Conduct Authority flagged upheaval in financial market data in January, citing “limited competition”.

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Reporting by Huw Jones, editing by William Maclean

Our standards: The Thomson Reuters Trust Principles.

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