The UK’s Financial Conduct Authority (FCA) has begun a review into the use and value of data and advanced analytics in wholesale financial markets, both now and in the future. The review comes in the form of a Call for Input (CFI) and will look at three specific areas – trading data, benchmarks and market data vendor services.
The FCA says new forms of data and analytical techniques are increasingly being used across wholesale financial markets and that access to data is needed to identify investment opportunities, trade, make investment decisions, to evaluate positions and to meet regulatory obligations. As the demand for data increases, however, the FCA also observes that firms that generate data may be able to use or market their data in ways which create poor outcomes for users and ultimately end-consumers, in particular, data generators increasing charges or limiting the availability of data.
“We are launching this CFI to better understand how data and advanced analytics are being accessed and used, the value offered to market participants and whether data are being competitively sold and priced,” the FCA says. “The CFI will allow us to determine whether we need to do further work to address any harm that we identify, as well as ensure our regulations do not hinder innovation.
“We want to know whether users have concerns with the way trading data, benchmarks and vendor services are priced and sold,” it adds. “Feedback from our previous studies suggested that trading venues and benchmark administrators may not face sufficient competitive pressures, allowing them to charge high prices to clients and competitors. We want to know whether this is the case, which users are affected and why? This will help us decide whether further work is necessary to address any harms we observe.”
The FCA says it also wishes to use the feedback to understand how innovations in data generation and use may impact market structure, adding that it plans to commission work that will look at this issue over a longer term.
“Wholesale financial markets play a vital role in our economy, and it is important that they work well,” says Christopher Woolard, executive director of strategy and competition at the FCA. “There is rapid and wide-ranging innovation in data in wholesale markets as firms become better able to gather and analyse data. More efficient, comprehensive and timely data for wholesale market participants have the potential to generate significant benefits. But these changes may also create new risks that may require us to act. We are launching this review to better understand any risks and assess whether FCA action is needed.”
The review is open until 1 May 2020 and the FCA says a feedback statement will be published in Autumn 2020, which will set out any findings and detail any next steps.