🕒 5 min read
At a time when asset managers’ margins are under pressure and the cost of market data continues to rise, the question arises: why continue to pay exorbitant rates for index data?
The emergence of new players such as Solactive and more recently Fair Cost Index, as well as innovative technological solutions such as Lakant, offer credible and cost-effective alternatives. This article explores the current dynamics of the index data market, regulatory challenges and emerging solutions that are redefining the landscape.
Historical concentration with inflationary effects
The index data market has historically been dominated by an oligopoly consisting of MSCI, S&P Dow Jones and FTSE Russell. This concentration has led to a significant increase in costs for asset managers. According to a study by Substantive Research, the cost of market data for rating agencies and index providers increased by 12% to 13% year-on-year in 2023, with extreme cases reaching up to 600%.
The emergence of new disruptive suppliers
Solactive: a diversified index offering and expertise in strategic replication
Solactive stands out for the richness and diversity of its index range, covering a multitude of asset classes and strategies. Since its creation in 2007, the company has developed tailor-made solutions for ETFs and other indexed investment products, offering flexibility tailored to the specific needs of investors.
Solactive offers a wide range of indices, from passive strategies to thematic and ESG indices. They are particularly renowned for their ability to replicate complex investment strategies, while offering greater flexibility to asset managers. Their platform enables extensive customization of indices, meeting specific needs while maintaining high standards of quality and transparency. Solactive also focuses on competitive pricing, offering an affordable alternative to incumbent market players.
Fair Cost Index: An innovative, cost-effective alternative for asset managers
Fair Cost Index places the notion of fair pricing at the heart of its value proposition. FCI aims to provide the most affordable indexes on the market without compromising on quality hence a suitable like-for-like alternative index offering.
As an industry-led solution, FCI’s DNA addresses the common concerns users have with leading providers (cf. FCA Market Study, Feb 2024), while giving asset managers unrestricted access to reliable, transparent, and relevant index data—freeing them from the excessive pricing imposed by incumbent players. By focusing on transparency and governance, FCI strives to offer a more affordable and equitable alternative for index acquisition. FCI offers a wide range of indices tailored to the needs of asset managers, covering a variety of geographic and thematic segments, while respecting increasingly demanding ESG and Climate criteria.
Thanks to its innovative approach and flexible data model, Fair Cost Index enables asset managers to reduce their acquisition costs while guaranteeing the quality and rigor of its Vanilla & Client-Designed indices. FCI’s pricing model enables clients to benefit from a more cost-effective solution tailored to their specific needs, while supporting transparent index governance.
Regulatory pressure and the quest for transparency
Regulators, aware of market concentration and opaque pricing, are stepping up their scrutiny. The Financial Conduct Authority (FCA) in the UK has expressed concerns about the lack of transparency and barriers to entry for new providers. In addition, regulations such as MiFID II and the Benchmark Regulation (BMR) in Europe impose stringent transparency and governance requirements, increasing compliance costs for index data users.
Technological solutions for efficient integration
One of the most underestimated but critical challenges for asset managers and asset servicers remains the cost of integrating index data. Indeed, beyond the price charged by suppliers, the aggregation, standardization and use of this data in internal systems (reporting, middle-office, risk management, compliance) represent a heavy operational burden.
Each index provider – historic or emerging – offers data in heterogeneous formats, with different calculation methodologies (weighting, update frequency, rebalancing rules, dividend treatment, etc.). This heterogeneity forces asset managers to mobilize costly IT resources to integrate and ensure the reliability of data flows. Added to this are issues of data quality, traceability (audit trail), and compliance with the Benchmark Regulation (BMR).
Lakant was created precisely to address this complexity. Our technological solution offers an intelligent aggregation platform, which centralizes and standardizes index data from multiple suppliers – both historical and emerging. Thanks to its normalization algorithms, Lakant automatically converts heterogeneous flows into a unified, easily exploitable model.
Towards a revaluation of expenditure based on index data
In an environment where margins are increasingly squeezed and regulations are tightening, asset managers and service providers must rethink their index data acquisition strategies. New players such as Fair Cost Index and Solactive, as well as innovative technologies such as Lakant, offer more flexible, affordable and transparent solutions. This is the ideal time to question the traditional model and seize opportunities that both save money and improve efficiency.
References
- • Substantive Research, “Market Data Vendors Raise Prices Aggressively in 2023”
- • Solactive, “Press Release – Solactive Wins Six Index Provider Prizes at Inaugural ETF Express Canadian 2023 Awards”
- • Environmental Finance, “ESG index provider of the year: Solactive”
- • Fair Cost Index, “Fair Cost Index – AM Tech Day Award – Dec 2024”
- • The Times, “FCA wants more competition to cut cost of financial data – Mar 1, 2024”
- • FCA – Wholesale Data Market Study MS23/1.5 – Feb 2024
- • Lakant, “Technology – lakant.io”