Thomas Richter, CEO of BVI, on rising data costs in asset management

What are the reasons for this development?<br><br>Thomas Richter: "The price increases are massive. The reasons are the oligopolies of stock exchanges and rating agencies, as well as the market dominance of major index and data providers. At the same time, fund companies are legally required to use stock prices, benchmarks, ratings, and other data from third-party providers. Market data is indispensable because it is a prerequisite for providing services along the entire value chain in asset management, from research to trading, clearing, settlement, compliance, and risk management, but also in sales or reporting. This gives data providers market power and leads to partially exploding prices. In addition, there is a de facto obligation to subscribe for increasingly complex data licenses that cover any use and dissemination of data in the asset management value chain right through the customer."

"The oligopolies and the behaviour of data providers are a case for competition law authorities. Politicians are now taking note of the powerlessness of individual users against the dominant data platforms. We are calling for an EU Data Vendor Act to regulate the commercial behaviour of these companies. Because if we don’t, the already considerable cost pressure in the fund industry will intensify further – also to the disadvantage of investors", Thomas Richter added.

Thomas Richter: "As part of the BVI Financial Market Initiative, we are calling for the cost-effective and simple procurement of stock market prices, index, rating, and ESG data that fund companies particularly need. The initiative primarily covers regulatory issues. For example, we have successfully advocated for the introduction of tickers for equities and bonds, which will ensure transparency and comparability of stock market prices. We are also calling for provisions in the Benchmark Regulation and the Credit Rating Agencies Regulation that provide better protection for data users. Together with the French fund association AFG and the Paris Europlace association, we are also calling for a harmonised regulation of fees and licence conditions for all data providers operating in the EU. Together with other European associations, we have filed a competition complaint against CUSIP Global Service, the authority that issues U.S. securities identification numbers. It is intended to prevent data monopolists from abusing their market power. We are also in favour of setting standards to expand the low-cost data offering for fund companies, and thus reduce the cost burden. Moreover, we are engaging with data providers to promote low-cost, preferably license-free, high-quality data products and services."