FCA outlines plan to ensure competitive investment markets

The Financial Conduct Authority has scheduled two market surveys to ensure that investment markets are competitive.

In response to a call for submissions, the FCA heard concerns that limited competition in the markets for benchmarks and indices, credit ratings and trading data could increase costs for investors and affect investment choices.

In a market study, which will begin this summer, the FCA will examine concerns that complex contracts for benchmarks and indices prevent switching to cheaper, better or more innovative alternative providers.

Benchmarks and indices are used by market participants such as asset managers, banks and clearing houses to track and evaluate asset prices and investment performance.

By the end of the year, the FCA will launch a second market study to assess whether high fees for accessing credit rating data are increasing costs for investors and limiting new market entrants.

Access to high quality credit ratings helps investment managers assess financial risk, influencing the investments they make.

The FCA will also start collecting additional information on the competition in the wholesale data market.

Trading data includes information about the number of financial instruments that are traded, what people are willing to pay for them, and the price at which trades are executed.

This data is provided by venues – such as stock exchanges – where these financial instruments are bought and sold.

Concerns have been raised that limited competition could increase costs and impact the types of assets investment managers buy and sell.

Access to wholesale data enables market participants who manage investments to identify and assess investment opportunities.

A lack of competition could affect the quality of wholesale data and mean increased costs for investors, including ultimately savers.

Effective competition is essential for well-functioning markets and is at the heart of the FCA’s wholesale strategy.

FCA’s Executive Director of Consumer and Competition, Sheldon Mills, said: “Access to wholesale data is really important for those who want to make investment decisions. Without it, they don’t have the information they need to make informed choices.

“Our call for papers and planned market studies aim to ensure that competition works well, that information is available to market players who want it and that innovation keeps pace with market developments.”