Senior executives managing execution desks across the sell-side back a regulatory response to halt the increase in market data fees, the latest Acuiti Sell-Side Execution Management Insight Report has found. 

The report, which is based upon a quarterly survey of the Acuiti Sell-Side Execution Expert Network, a group of senior executives from across the globe, found that 47% of the network thought that market data costs were “far too high”, with the remainder saying that they were too high.

Around half of respondents said that they frequently found it difficult to forecast market data costs while over half said that the cost of market data had somewhat or significantly limited entry into new markets.

Members of the Expert Network favoured a regulatory response to the rising costs, with 58% backing a requirement for venues to submit to regulators the costs involved in producing market data and then imposing mandatory limits on mark-ups.

54% called for a simplification of licenses to end the need to audit firms on usage, while half said that contracts should be standardized across the industry.

The calls come in the wake of recent increases in market data fees levied by exchanges and other trading venues. Fees for market data were widely introduced in the wake of lower volumes in the early 2010s as central banks support for markets reduced volatility.

Since then, exchanges have pursed aggressive acquisition strategies in the field of market data and increased the cost and complexity of fee schedules offered to clients.

The Q1 Sell-Side Management Insight Report also includes a deep-dive on innovation in sell-side execution, produced in partnership with Horizon Software.

Members of the Expert Network pointed to the development of algorithms and increased use of artificial intelligence as the two key areas that they expected to bring new efficiencies to the market.

For many execution desks, focus on algo functions is turning beyond market impact, where product development is already mature. Members of the network are increasingly interested in algos that drive operational and administrative efficiency —  being applied to functions that can bunch or cancel and replace orders, where manual intervention is still widespread.

However, there is currently significant room for improvement in optimization across the sell-side. According to the latest survey, pricing, pre-trade risk, real-time P&L and post-trade were areas in which levels of automation and optimization currently need improvement. Members of the network reported challenges in securing budgets for investment in optimization while at the same time expressing concerns over wholesale system replacement.

Sylvain Thieullent, CEO of Horizon Software, commented, "The findings of the Acuiti Sell-Side Execution Management Insight Report highlight the increasing challenges facing sell-side firms in managing market data costs and improving automation and optimization. We are pleased to collaborate with Acuiti in developing solutions that help our clients navigate these challenges and improve their execution performance."

“Members of the Acuiti Sell-Side Execution Expert Network are seeking cost-effective ways of increasing optimization and automation without the risk, cost and complexity of a large scale overhaul of their technology infrastructure,” says Ross Lancaster, Head of Research at Acuiti. “Less than a fifth of the network said that their currently technology infrastructure made it easy to bring new products and services to market quickly, while a strong majority favoured incremental investments in technology over wholesale replacement.”

Other findings in this report include:

• 2022 was a very strong year for execution desks as volatility gripped global markets
• Executives expect the most opportunity in metals and commodities during 2023
• Cost bases increased in 2022 but executives are targeting headcount reduction in 2023