According to a report published by the European Financial Markets Association, the cost of data in fixed income markets has increased by 50% over the past five years.
This is much faster than the 25% increase in stock data prices over the same period.
"Unnecessarily high market data fees become a barrier to entry into the financial markets and ultimately lead to unfavorable outcomes for the end investor through fewer options and higher costs," said Adam Farkas, CEO of AFME.
The report found that data costs increased across all categories, with data from multilateral trading facilities increasing by 46 percent at one location and 107 percent at another. Data from inter-dealer brokers increased by 183 percent.
As data costs in fixed income are growing faster than in other markets, the newspaper warns that market participants may be forced to scale back their purchases and may even remove certain markets.
In an email to Financial News, Victoria Webster, head of fixed income at AFME, said, "There is concern that the upward impact of these increasing costs on fixed income markets is being underestimated."
"It's not just a sell-side specific issue, our report shows that pricing and reference data are also the top 3 areas of data use in the buy-side fixed income market, so they are also impacted by the cost of any data increase," she said.
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Some of the growth can be attributed to regulatory and other factors such as MiFID II and, in particular, the UK's withdrawal from the EU.
The price of data from exchanges is already under review in the EU and the UK. Both sides are looking to develop a "consolidation tape" that would data center the exchanges from all venues into one repository.
Webster said that while consolidating the tapes would create "a more transparent and comprehensive view of the entire market," it does not solve the underlying problem.
"Regardless of its construction and development, bond consolidation tapes do not address the significantly increased cost of market data in the fixed income market and still require the purchase of raw data feed data that can be used to inform algorithms or tools," she said.
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The report also says that many market participants still need real-time, low-latency feeds that integrated tape cannot provide.
As a first step in addressing rising data costs, it recommends standardization, such as the need for consistent pricing models, homogenized data formats and uniform data access procedures among data providers.
To contact the author of this story and provide feedback or news, please email Jeremy Chan