A study by the Association of Financial Markets in Europe (AFME) has provides a new view of rising fixed income data costs in eight categories; terminals, pricing and reference data, exchange fees, research and analytics, data-feeds, indices, ratings from different types of providers.
The spend on fixed income market data by the sell side firms taking part in the report increased by 50% between 2017-2021, against 25% for overall sell-side market data including equities data.
The top components of sell-side fixed income data spend are terminals (34% of overall FI spend), pricing and reference data (21%) and research and analytics (20%). Fixed Income therefore relies more heavily on non-exchange pricing data. This is significantly different than for equities.
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Joseph Cordahi, product strategy director at market data management firm NeoXam, says “With investors scrutinising performance daily, there has never been a more pressing need to address rising data costs in fixed income – particularly with costs going up across other areas. Take an illiquid credit bond as a prime case in point. Typically, there is a few short weeks where a credit bond trades – and then it just stays dormant until it eventually redeems in some credit fund. When it eventually does trade, there is often a huge amount of frustration among dealers having to pay a wide spread which makes it even harder for a set price to be agreed, and consequently for the custodian to provide the correct fee.”
This has been driven by an increase of 35% on the existing cost base and new, incremental usage which accounts for an additional 15% of spend. Brexit will also inevitably increase the costs of producing, purchasing and analysing fixed income market data but more will be known as the impact of post-Brexit divergence becomes clearer.
Costs in all categories have increased, notably from the exchanges for non-display fees, ranging from 38% to significantly higher, but much lower for display fees, between 0 to 37%, commercial data vendors (35% spend increase above what can be attributed to an increase in users), multi-lateral trading facility (MTFs) which ranged from 46% to 107%, and interdealer brokers’ Organised Trading Facility (OTFs) (183%).
Spend on data from two major evaluated pricing data providers had increased by 50% and 83% respectively over the last five years.
The top categories of fixed income data spend for the buy-side are similar to the sell-side with terminals (33%) and pricing & reference data (18%), with notably significant but not identical increases in buy-side spend.
©Markets Media Europe, 2022
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