Boutique financial data provider: FCA Wholesale Data Market Study findings demand change in industry practice
LONDON, UNITED KINGDOM // MARCH 20, 2024 – Exchange Data International (EDI), a leading boutique independent financial data vendor, is today calling on the FCA to propose legislation outlawing discriminatory and anti-competitive practices implemented by major data vendors following the recent publication of the Wholesale Data Market Study.
The study – which looked at competition between wholesale data providers – found that benchmark suppliers of data as well as major data vendors require clients to purge or cease using historical data upon contract termination unless they pay for an ongoing licence fee.
This means that, in effect, clients of benchmark suppliers and the major data vendors are only able to rent the data they are provided with, rather than own it. Furthermore, if clients terminate their contract with one or these suppliers they lose access to all historical data; this is an issue particularly pertinent to asset managers, who generally need historical data for performance comparison.
For many clients, the additional costs of switching data provider – including contract termination clauses and requirements to purge historical data – offset any savings gained by switching provider thereby making the switch uneconomic, the study found.
The study also found these requirements are more frequently imposed by main players rather than challengers, and that they present considerable barriers to both a client’s ability to switch data providers, and a challenger data provider’s ability to establish a significant market share. This is the primary reason why no challenger data provider has more than 3% of the market, and cumulatively challengers only have a 6% market share.
Despite these findings, the FCA study does not currently recommend or call for any legislation change.
Pre Brexit EDI commissioned a leading law firm to investigate these termination practices within the context of competition law, with their assessment being that “there are cases which suggest that there are plausible arguments to be made that the Termination Practice infringes EU competition law”, specifically in relation to “abuse of dominance” under Article 102 TEU and its national law equivalents.
The legal report also found that the termination practice imposed on clients by large data vendors may constitute a de facto obligation to remain with that vendor, as the negative repercussions of losing past valuable data makes it unlikely they will switch provider.
As such, with the Wholesale Data Market Study consultation period open until 12th April, EDI is now calling for the FCA to push for legislation that would prohibit both the requirement for data to be expunged upon contract termination, and the imposition of licence fees to retain historical data post termination.
Jonathan Bloch, CEO of EDI, remarked: “Current termination provisions not only create huge barriers for clients who want to switch providers, but also suffocate small data vendors who could otherwise flourish within the market. Calling this practice out isn’t enough: the FCA has a real opportunity here to take tangible action by calling for legal or regulatory change. In other jurisdictions regulators have made both legal and regulatory attempts to curb anti-comparative behaviour: all eyes are now on the FCA.”
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