AFME finds sell-side fixed income data spend up 50% over five years

Dan Barnes

A study by the Association of Financial Markets in Europe (AFME) has provides a new view of rising fixed income data costs in eight categories; terminals, pricing and reference data, exchange fees, research and analytics, data-feeds, indices, ratings from different types of providers.

The spend on fixed income market data by the sell side firms taking part in the report increased by 50% between 2017-2021, against 25% for overall sell-side market data including equities data.

The top components of sell-side fixed income data spend are terminals (34% of overall FI spend), pricing and reference data (21%) and research and analytics (20%). Fixed Income therefore relies more heavily on non-exchange pricing data. This is significantly different than for equities.

Joseph Cordahi, product strategy director, NeoXam.

Joseph Cordahi, product strategy director at market data management firm NeoXam, says “With investors scrutinising performance daily, there has never been a more pressing need to address rising data costs in fixed income – particularly with costs going up across other areas. Take an illiquid credit bond as a prime case in point. Typically, there is a few short weeks where a credit bond trades – and then it just stays dormant until it eventually redeems in some credit fund. When it eventually does trade, there is often a huge amount of frustration among dealers having to pay a wide spread which makes it even harder for a set price to be agreed, and consequently for the custodian to provide the correct fee.”

This has been driven by an increase of 35% on the existing cost base and new, incremental usage which accounts for an additional 15% of spend. Brexit will also inevitably increase the costs of producing, purchasing and analysing fixed income market data but more will be known as the impact of post-Brexit divergence becomes clearer.

Costs in all categories have increased, notably from the exchanges for non-display fees, ranging from 38% to significantly higher, but much lower for display fees, between 0 to 37%, commercial data vendors (35% spend increase above what can be attributed to an increase in users), multi-lateral trading facility (MTFs) which ranged from 46% to 107%, and interdealer brokers’ Organised Trading Facility (OTFs) (183%).

Spend on data from two major evaluated pricing data providers had increased by 50% and 83% respectively over the last five years.

The top categories of fixed income data spend for the buy-side are similar to the sell-side with terminals (33%) and pricing & reference data (18%), with notably significant but not identical increases in buy-side spend.

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