Transparency of market data fees back in spotlight

25 September 2018

The lack of transparency and rising cost of market data is a concern continually raised by participants across the spot FX market.

In the spot FX market, there is a widespread view that there needs to be greater transparency in the pricing of market data.

Over the past decade, the costs and fees associated with market data have skyrocketed, and existing packages are often unbundled and sold separately to improve profit margins – further increasing costs for trading institutions.

This remains one of the most opaque areas of trading and has been a constant bugbear for institutions.

The issue was brought to the fore again when two major hedge fund trade groups, the Managed Funds Association and the Alternative Investment Management Association, asked the U.S. Securities and Exchange Commission to take action.

They are concerned that institutional investors continue to experience significant increases in market data fees, new fee categories and unbundling. They believe this restricts trade and harms competition.

This follows on from 24 trading institutions, including large banks and asset managers, who called for more transparency and requested exchanges reveal their profit margins for market data products.

Large institutions are negotiating better prices and cutting special deals based on how much they agree to trade on a particular venue. This means smaller institutions with lower trading volumes and less bargaining power are struggling to get value for money.”

The good news is that industry participants are increasingly vocal about their concerns. As a result, the distribution, cost and transparency of market data packages are now coming under scrutiny.

At ParFX, we deliver market data to our trading customers at no additional cost – everyone gets the same data, at the same frequency in parallel. We also don’t negotiate special deals – this is in direct contrast to the approach of other providers.

It is high time other platform providers and data providers followed suit to bring themselves in line with the FX Global Code and the standards we expect in 2018 by making market data more transparent and affordable for everyone.