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Expensive data?

Interesting rumbles in the market about the high cost of trading information.  Some exchanges are claiming that MiFID will not only fragment liquidity but will also increase the cost of market data.  Some investment firms are planning to take advantage of one of the “competition is good” principles of MiFID and intend to sell their own equities trading data.  Having been forced for years either to trade equities on-exchange or to give their off-exchange trading data to exchanges, thereby allowing the exchanges to make more and more money from selling that data, it looks like the market for market data may be about to change.

Exchanges claim that investment firms intend to charge “silly money” for their data - even more than the local exchange does.  However, there may be a few things to consider in the underlying maths.

Firstly, the user can’t get pan-European equity data from just one exchange – the user would have to pay a fee per-terminal for each exchange that they need data from, so there is a cumulative cost effect here.  Secondly, the user cannot select to receive and pay for just a range of data (eg only the blue chips) from each exchange – they have to pay for everything whether they want it or not.  Thirdly, the major investment firms are responsible for most of the traded volume on European exchanges, so from one source the user can get a spread of European data rather than having to pay multiple exchanges for data.  Fourthly, as exchanges would have less data to deliver because investment firms start delivering themselves, will the exchanges reduce their prices for data?

And fifthly, it’s also interesting that the US SEC is already examining the basis for why exchanges charge so much for data in the first place.


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