FCA provisionally opts not to involve CMA in wholesale data market review

investmentweek.co.uk:

The FCA argued it is the more appropriate body to remedy the issues of the wholesale data market

In an update published today (31 August), the FCA revealed four respondents had sought for the regulator to make an MIR in relation to the benchmarks, credit ratings data and market data vendor (MDV) services industries.

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These were German investment funds association BVI, UK financial markets data users association Information Providers User Group, a benchmarks provider and a financial data services consultancy firm.

The respondents sought the MIR for benchmarks firms due to the consolidation of the market around three main providers that account for a «large majority» of UK revenues generated since 2017.

It is alleged these administrators have market power due to their benchmarks being considered «must-have» for clients and investors, which in turn is used to raise already high fees without offering «any increase in quality of service».

They also argued the pricing practices are «opaque» and often «must-have» benchmarks are bundled with other benchmarks not required by clients, forcing users to license benchmarks they do not require.

The FCA noted the consolidation and network effect resulting in «must-have» products, along with higher costs caused by complex licensing terms, package deals and termination requirements. It also notes the increased input costs to producing benchmarks may justify some price rises, but also stands as a barrier to entry for competitors.

Despite these competition concerns, the FCA believes its rule-making powers to be a more appropriate remedy than the intervention of the CMA at this stage.

The respondents argued the largest credit rating