Users Seek Justification for LSE Fee Hikes

Combined with two earlier fee hikes for the same products in July 2013 and January 2014, the new fees represent a cumulative increase of between five and 15 percent over two-and-a-half years. However, with the LSE’s market share of trading in FTSE 100 stocks currently below 60 percent, data subscribers say the price of the data no longer reflects its value. 

In a notification sent to end users on Sept. 29, Caroline O’Shaughnessy, global head of sales and marketing for LSEG’s Information Services division, informed customers of the new pricing model, which will take effect on Jan. 1, 2016.

Monthly non-member fees for UK Level 1 data will rise by 4.75 percent from £40 to £41.90 per device for professional users, while UK Level 2 data will rise by 4.9 percent from £157.50 to £165.05. Member fees for Level 1 and 2 will also increase by around five percent.

Meanwhile, monthly non-member fees for International Level 1 and Level 2 market data will increase by 4.77 percent and 4.82 percent respectively, from £22 to £23.05 and £82 to £85.95 per device. International Level 1 and Level 2 data for members will also increase by five percent.

Back in July 2013, the LSEG increased member and non-member professional fees by more than 5 percent for UK Level 1 data, 7.5 percent for International Level 1 data, and between 2 and 3 percent for International Level 2 data. Then six months later, in January 2014, the exchange introduced a further 2.5 percent increase for non-members for its Level 1 and Level 2 UK and International feeds (IMD, Oct. 18 2013). 

“To put it in plainly, a real-time non-member professional terminal user of the LSE’s UK core UK Level 1 data service has seen a combined price hike of nearly 14 percent in real terms… from the end of June 2013 to the beginning of January 2016, in addition to a 15 percent increase in fees for international data over the same period and excluding any additional fees charged by vendors that distribute the data,” says an exchange data policy expert who requested anonymity.

To obtain a full picture of LSE Level 2, users must take both the UK and International datafeed, which effective Jan. 1, 2016, equates to £251 per device per month for non-members. In comparison, Euronext will charge €94 (£67) per month for full Level 2 data from Jan. 1, 2016, which includes the French, Dutch, Belgian and Portuguese markets. Meanwhile, Deutsche Börse will charge €80.62 (£57) per month from Jan. 1, 2016, for its Xetra Ultra Level 2. From January 2016, the LSE will be nearly four times more expensive for Level 2 data than Euronext, and more than four times more expensive than Deutsche Börse.

“Are they four times more important or liquid?” asks a market data manager at a bank in London. “How else can they explain their value?” 

Simon Youdan, head of business development for LSE real time data declines to comment on the disparity between the LSE and other exchanges' Level 2 fees, but says it offers customers of a range of data options for over 26,000 tradeable instruments with prices that are fully transparent on its public website. “We have provided our customers with notification of the changes ahead of their introduction in January 2016 in line with industry-wide best practice timelines. There is no fee increase on non-display or redistribution licences, and the changes reflect continued investment and enhancement of our content delivery and scope, including our Group Ticker Plant project, which will considerably improve customer performance,” Youdan adds.

However, according to one market data manager, “such a sustained pricing premium” could be seen as both “unacceptable and unreasonable” in competition terms, and also “perhaps in conflict with both the spirit and letter” of the forthcoming MiFID 2 regulations. 

Fair Share

The LSEG’s real-time data revenues across the London Stock Exchange and Borsa Italiana markets fell by 11 percent from £94.4 million in 2013 to £84.3 million in 2014, down from £102.8 million for 2012. Some end users suggest that the falls are likely a result of fewer individuals consuming the data, and that the LSE is trying to compensate for declining terminal numbers by increasing prices. 

“When looking at both the trends in declining revenues and increases in pricing, it appears that the LSE is quite content to charge more and more for data to those users who absolutely require it in order to trade effectively, achieve best execution for their clients, and perform other increasingly mandatory regulatory requirements,” says the exchange data policy expert. “One can perhaps only then interpret such actions as cynical pricing tactics, by a dominant market provider, that (a) does not have to deal with any real competition and (b) has yet to be challenged by any pricing or regulatory authorities.”