Fund managers are being squeezed by rising market data costs and an increasingly convoluted set of licenses for the usage of that data, according to the Information Providers User Group (IPUG).
Solvency II and Basel III requirements mean that ever more data has to be used in increasingly complex ways. Data acquisition has become a compulsory tool for fund managers, especially those dealing in OTC derivatives.
According to David Berry, an executive committee member of IPUG – a pan-European organisation representing financial institutions that consume data – data providers have recognised the fact that their data is now indispensable and have subsequently introduced new licencing requirements that narrowed the permitted usage of provided data sets.
Previously, licencing a data stream that covered a certain swap execution facility would enable its usage across all arms of the asset manager’s business. Now, separate use cases – such as information sharing and especially redistribution – are separate licences that elicit multiple charges for a single set of data.
However, according to Berry, certain incoming industry developments could help alleviate at least a small portion of the pressure from this “monopolistic market model.”
The introduction of market data invoicing standardisation by the International Swaps and Derivatives Association has reduced the administration cost of multiple licences, mitigating some of the impact.
ESMA is also working to negate the power of data providers by introducing a new centralised data source for EMIR and MiFIR compliance, which offers a single access point and provides an alternative to commercial data sources.