Wholesale data: Firms stuck in ‘endless cycle’ of price rises due to aggressive pricing strategies

Aggressive pricing strategies from wholesale data vendors leaves consumers facing an “endless cycle” of price rises, according to new research.

A new paper from Substantive Research shows that vendors in the wholesale data market can put up prices by up to 50 per cent even when the use cases for the product remains the same.

Firms were told that “changes in pricing structure” justified the price increase. Nearly two thirds of surveyed firms were told by vendors that they were on heavily discounted deals and so were compelled to pay more to keep them in line with peers.

“A key dynamic we’ve uncovered is that by the time a consumer’s discounts are removed over a multi-year agreement, vendors have raised the ‘standard’ price again, and by a lot, sparking another negotiation,” Mike Carrodus, chief executive of Substantive Research, said.

“This means that firms procuring market data never catch up with what vendors say they should be paying,” he added.

The data demonstrates the opaque nature of pricing in the Wholesale data market. Trading data includes information on the prices and volumes of financial products traded and supplied by venues such as stock exchanges. 

The Financial Conduct Authority (FCA) has previously investigated the wholesale data market, finding that its concentrated among a few firms meaning there is little choice for users. Switching is also not an easy option.

Some features of the market “restrict or distort competition,” the FCA said in August.

Previous research from Substantive Research showed some institutions are paying over 26 times more than peers for the same data.

“The market is hoping for significant changes to the way this market is run, anything less and consumers of market data will have to make fundamental changes to their data budgeting and procurement processes,” Carrodus said.

The FCA is expected to publish its full review into the wholesale data market on 1 March.