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Substantive Research reveals deep inconsistencies in Market Data pricing

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Substantive Research, a research discovery and research spend analytics provider for the buy-side, has published headline conclusions on the current state of the Market Data pricing market, based on insights generated by its new Market Data Spend Analytics service.

Substantive Research has found that pricing is not consistent and there is large variance in pricing and little or no correlation to the size of the firm consuming the market data. Even accounting for specific “apples- to- apples” use cases, the range of inconsistencies applied to pricing post-negotiation is between 10% and 50%.

Buy-side budgets vary from 0.55bps to 1.27bps of AUM – this is one of the largest costs of doing business for an asset manager and it is increasing materially YoY.

Average potential savings per provider are $360k – and with many institutions using a long list of providers, this figure scales up rapidly. 

Specifically, the opacity of the index market is evident in the large pricing disparities between wholesale market data buyers with similar use cases:

The pricing that buy-side institutions receive for supplying a single index from the same provider differs by an average dispersion of 21% – the overall range from lowest price to highest price can be as high as 219% (some institutions are paying more than twice as much as peers).

For reporting licenses the average dispersion in pricing can be up to 37% – the range from lowest to highest can be as high as 472% (some institutions are paying almost five times more than their peer group).

Average spend on index products per provider can be broken down into 44% spent on licenses and 56% spent on the underlying benchmarks – and licenses are where the greatest price variability occurs for similar use cases.

Conclusions are based on an aggregated, market-wide perspective, which provides headline data on the index market, a core area of focus and cost for the buy-side.

This comes at a time when global spend on financial market data reached a record $35.6 billion in 2021, according to the latest Financial Market Data & Segment Sizing 2022 research from Burton-Taylor.

Having benchmarked pricing in investment research for over five years and (most intensively post-MiFID II), Substantive Research can now provide clients with granular insight into the full breadth of their data budgets, including index providers, rating agencies, pricing and reference data suppliers, research/analytics and ESG.

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