European exchange data prices surge, new study shows

A new study finds that some of Europe’s largest exchanges have been using their incumbent advantage as must-have sources of data to boost their revenues by structuring datasets originally sold together into increasingly complex bundles at increased costs.

Market Structure Partners, a market intelligence and advisory firm, published a report analyzing market data prices and fee structures from 2017 to 2024, and found that fee schedules have increased exponentially across Deutsche Börse, Euronext, London Stock Exchange Group (LSEG), Nasdaq Nordics, and SIX, far outpacing the period’s inflation rates.

The report says that Deutsche Börse’s price list and terms and conditions have grown from 10 to 47 pages for the same market data, while Euronext’s have increased from 19 to 46 pages. These fee categories differentiate between data used by physical users at terminals (display data) and data used by machines (non-display data).

“Even though both display data and non-display data comes from the same data feed, exchanges put a premium on non-display data,” the report says. “Multiple additional fees are then applied, ranging from charging for the number of devices that might have access to the data, to the time of day the data is being used.”

Non-display datasets are tiered depending on the data consumer’s use case. If the buyer is, for example, a multilateral trading facility (MTF), which competes with exchanges for market share, it is typically charged more than if the firm is a broker.

A capital markets analyst at a Nordic trade association, which represents end-user trading firms, explained to WatersTechnology that this process makes for a hellish experience for market data buyers.

“It’s probably the worst price list, in any sector, in any industry, worldwide,” they say.

Market data is produced as a byproduct of trading, making it essentially free to create and not subject to the same rules around availability and demand as other commodities such as oil. Scarcity of data would provide a plausible reason for datasets to increase in price, as well as increased demand, but the report describes the rate of price increases at exchanges as “inexplicable.”

However, a spokesperson for Nasdaq tells WatersTechnology the claim that exchange data fees are increasing is misleading. “Any price increases have been below inflation over the same period, and we are fully committed to fair and transparent pricing. We are relentlessly focused on innovation and enhancing the resilience of our world-class markets and data services to ensure they keep up with the accelerating pace and sophistication of trading.”

Even though market data is functionally an exhaust pipe, it is—apparently—incredibly valuable. Determining that value, though, as well as who deserves to reap its rewards, is less straightforward, as this 2023 blog post by Nasdaq illustrates.

Due to the tiering of different customers, every data user has a different cost profile, despite using the same data, which means no two users have comparable charges for market data. The rationale behind the differential pricing structure is to ensure that small firms and individual investors have access to market data equal to the biggest investment and trading firms. In essence, the heaviest market data users with the deepest pockets subsidize the lightest users.

But in practice, the report says differential pricing allows exchanges to lower prices for one set of customers and offset that by increasing prices for other customers based on criteria other than size.

Similar findings have been made by London-based consultancy Substantive Research, which, in its own study published in January 2024, found enormous price disparities in rates charged and discounts offered by the major index providers—S&P, MSCI, and FTSE. Some market data users are paying hundreds of percentage points more than their peers for the same data and services, for the same use cases, from the same providers, Substantive found. (Substantive was acquired by Euronext in September, nine months after its report came out.)

 A new study on pricing differentials is imminent from Substantive Research, CEO Mike Carrodus tells WatersTechnology.

The capital markets analyst posits that the increased reliance on packaging data in different ways is due to headwinds exchanges face elsewhere. Exchanges’ M&A activity around data and analytics providers—counting LSEG’s acquisition of Refinitiv, Nasdaq’s Quandl buy, and Cboe’s data shopping spree, among others—are indicative of the industry’s shrinking margins in their listings businesses and a significantly more lucrative market data business.

LSEG has struggled with listings recently, but the Refinitiv deal and an influential tie-up with US tech giant Microsoft has kept its revenues high, with LSEG data now available through the Microsoft Teams-enabled Workspace platform.

“Exchanges have experienced considerable loss of market share of secondary market trading in the stocks that are listed on their own markets since Mifid I,” the report states. “This suggests that the dataset for their own market ought to be worth less than it once was because it is no longer guaranteed to show the best price for these stocks and does not show the entire volume available.”

However, because market data is a critical function for trading firms, such depreciation has not been seen.

“They only have one part of the business where they can increase their income, and that is market data,” the analyst explains. “Fundamentally, they are privately owned companies with a monopoly, which they use to increase prices.”

A spokesperson for Deutsche Börse referred WatersTechnology to a 2024 study conducted by Oxera and commissioned by members of the Federation of European Securities Exchanges, which represents all the exchanges in this story except for LSEG. The study analyzed exchange revenue data and market data price developments.

Oxera’s analysis shows that stock exchange revenues remained stable from 2018 to 2023. FESE members’ Mifir market data revenues were €342 million ($356 million) in 2023, up from €298 million in 2018, an average annual increase of 3%. It found this modest growth occurred due to increased regulation, inflation, and competition for talent. 

“Notably, Deutsche Börse AG did not pass on all additional costs for market data production and dissemination,” the spokesperson says. “Oxera’s analysis shows the share of joint revenues from market data and trade execution has remained stable. For FESE member exchanges, the weighted average proportion was 26% in 2018 and 29% in 2023. Most exchange revenues still come from trade execution.”

A spokesperson for Euronext also referred to the Oxera study, saying it “shows exchanges market data pricing remains reasonable, reflecting shifts in data consumption, evolving fee structures, and broader industry costs.” 

Monopoly money

Commenting on Substantive’s study into pricing disparities from last year, Rudolf Siebel, head of German asset management and investment fund trade association BVI, which also has a horse in this race, said the market data prices were a matter of “monopolies and oligopolies.”

“We are faced with the commercial situation, and we are faced with monopolies and oligopolies,” Siebel said. “Wherever you are using data and for what purpose—which obviously can go far beyond the idea of what data you’re really needing and what data you should pay for—it enables them to bundle products [and] to find new ideas about how to license.”

His view was echoed by Columbia Threadneedle’s global head of data management, James Davenport, who described “inflation-busting” price increases as opportunistic means to extort firms that have few to no alternatives.

Despite consumers holding generally negative views of their market data providers, the problem shows no signs of abating. Last year, the UK’s Financial Conduct Authority concluded a year-long investigation into whether the markets operated by market data, benchmark, and credit ratings providers were being hindered by anti-competitive behavior.

Across all three markets in scope of the study, the FCA found that there is a high concentration of no more than three key providers, those key providers are highly profitable, data from key providers is essential to users, and key providers face limited competition from challenger firms.

“However, we do not plan to consider options for directly regulating prices of wholesale data,” the FCA wrote in its findings.

All’s fair in …

The new report by Market Structure Partners explores possible arguments, or justifications, by the exchanges for the rises. But it could not substantiate that those exchanges faced increased production costs, nor could it find evidence of significant investment or R&D.

The Euronext spokesperson said the claim that the exchange has underinvested in its technology is unfounded. They cited a series of projects from last year, including the in-house development of its Optiq trading platform, the migration of its core datacenter to Italy with colocation services and customer-managed connectivity, the migration of all Euronext markets, including Borsa Italiana, to the Optiq platform, and the expansion of cash equity, financial and commodities derivatives clearing for Euronext markets.

Mifid II requires that exchanges make individual public disclosures of their market data revenue as a proportion of total equity market revenue (MDR%). These disclosures, used in the report’s methodology, show that the MDR% is increasing at Europe’s largest exchanges, despite adverse market conditions. As non-EU exchanges, these disclosures do not apply to LSEG (except for its European subsidiary, Turquoise) and SIX.

The information and reporting periods provided by exchanges were inconsistent, but disclosures between 2020 and 2023 (2023 data from LSEG was unavailable, the report said) show that exchanges’ market data revenues have significantly increased as a proportion of their overall equity market revenue: Deutsche Börse (20.7% to 31%) Euronext (10.6% to 19%), Nasdaq Nordics (19% to 23%), and Turquoise (10.5% to 27%).

A spokesperson for LSEG disagrees with the report’s findings, saying the data used in the report was inaccurately represented. The MDR% fee increase from 10.5% in 2020 to 27% in 2022 combines Turquoise Global Holdings (TGHL) and Turquoise Europe (TGHE), an MTF that went live post-Brexit in 2021, so the transaction volumes across TGHL and TGHE should also have been factored in. TGHL and TGHE waive market data fees for retail investors. 

However, the Market Structure Partners report seems only to have looked at TGHL volumes. When combined, LSEG says there was actually an increase of 5% of transaction volumes for the 2020–2022 period.

The spokesperson adds that all of LSEG’s equity trading entities are required to make reasonable commercial basis disclosures, including by the FCA, available on the exchange’s website. “We have four years of the disclosures available on our website from 2019, yet the MSP report says the data is only available for 2020–2022. It is, therefore, inaccurate.” 

Sentiment about unfairness in market data from industry groups has been consistent, but much like in the UK, EU regulation limiting exchanges from hiking prices has not been forthcoming. The analyst at the Nordic trade association says this is due to conflicting messaging around the severity—or even the existence—of price disparities, which creates a complicated dilemma for legislators and regulators.

“The problem is that the exchanges produce opposite reports, so it kind of ends up as a battle of reports, which makes it difficult for the politicians and regulators to see through what is true or not,” they say.

During a review of Mifid I, the European Commission considered that prices should be reduced to a “reasonable level,” but the situation did not improve. The report goes on to quote the chair of the European Securities and Markets Authority, which, in 2018, said, “Following the application of Mifid II, we were made aware of substantial increases in the costs of market data, reaching at times 400% compared to prices charged prior to January 3, 2018.”

Esma has hosted numerous consultations regarding the pricing of market data and whether current rules are too lax, and it has received plenty of feedback from banks and industry groups.

A response from the FIA European Principal Traders Association explained that since market data consumption is non-discretionary for many trading firms, if one of them wishes to trade on a specific trading venue it must consume market data from that venue.

“By its nature and underlying many of the issues in this area is the fact that the demand for market data is largely inelastic,” the letter said.

Until regulation does come into effect, market data buyers are faced with the same grim reality as before, the analyst says.

“That’s how [exchanges] work. They capture [the data], they change the price list, and we never get lower prices,” they say. “We only get higher prices.”