Sell side supports legislation to slow upward trend in market data fees
The most recent Acuiti Sell-Side Execution Management Insight Report reveals that senior executives overseeing execution desks across the sell-side support a regulatory approach to stop the rise in market data costs.
Based on a quarterly survey of senior executives from around the world, the Acuiti Sell-Side Execution Expert Network, the analysis indicated that 47% of the network said market data prices were “far too high,” with the remaining network members believing they were too high.
Half of the respondents reported that the cost of market data had significantly or somewhat restricted entry into new markets. About half of the respondents claimed that they frequently found it difficult to anticipate market data costs.
58% of Expert Network participants supported requiring venues to report to regulators the costs associated with gathering market data and enacting obligatory mark-up limitations as a regulatory reaction to the escalating costs.
In order to eliminate the requirement to audit companies on consumption, 54% of respondents called for licensing to be simplified. Meanwhile, 50% thought contracts should be standardized across the sector.
The requests follow a recent rise in market data costs assessed by exchanges and other trading venues. Early in the 2010s, as central banks’ support for markets lowered volatility, lower volumes led to a widespread introduction of fees for market data.
Since then, exchanges have pursued aggressive acquisition methods in the area of market data and raised the cost and complexity of charge schedules provided to clients.
A comprehensive analysis of innovation in sell-side execution is also included in the Q1 Sell-Side Management Insight Report and was created in collaboration with Horizon Software.
The two main areas where Expert Network participants expected to see new market efficiencies were algorithm development and the growing use of artificial intelligence.
When product development has reached a mature stage, the focus of many execution desks is shifting from market effect to algo functionality. Although manual intervention is still frequently used in operations that can bundle, cancel, and replace orders, network participants are becoming increasingly interested in algorithms promoting operational and administrative efficiency.
To be sure, a lot can still be done to optimize the sell-side. In terms of areas where levels of automation and optimization still need to be improved, the most recent poll included price, pre-trade risk, real-time P&L, and post-trade. Members of the network mentioned difficulties securing budgets for investments in optimization while at the same time voicing worries about complete system replacement.
The CEO of Horizon Software, Sylvain Thieullent, remarked, “The Acuiti Sell-Side Execution Management Insight Study findings emphasize the rising problems facing sell-side organizations in managing market data expenses and enhancing automation and optimization. We are glad to work with Acuiti to create solutions that guide our clients through these difficulties and improve their execution capabilities”.
He also added: “Members of the Acuiti Sell-Side Execution Expert Network are looking for cost-effective ways to increase optimization and automation without the risk, expense, or complexity of a significant revamp of their technological infrastructure,” says Ross Lancaster, Head of Research at Acuiti. “A solid majority preferred incremental expenditures in technology over wholesale replacement, while less than a fifth of the network claimed that their current technology infrastructure made it easier to bring new goods and services to market rapidly.”
Additional findings in this study include the following facts: as market volatility engulfed the world in 2022, execution desks experienced a very successful year. Experts predict that metals and commodities will offer the most opportunities in 2023. Although executives plan to reduce personnel in 2023, cost bases rose in 2022.