Some of the world’s largest asset managers have been voicing their concerns about the fees charged by European exchanges for market data.
In response to a consultation request issued for a revised version of the European Union’s Markets in Financial Instruments Directive, several buy-side firms – as well as the industry groups that represent them – have warned that these expenses are filtering down to investors, according to Financial News.
Buy-side firms face numerous challenges
This development could prove troublesome for institutions at a time when they are already facing greater demands from their clients. In the current landscape, many customers are demanding that buy-side firms harness innovative new approaches – including working with vintage strategies and a broader range of assets – as well as a greater number of benchmarks.
Using more benchmark data – and increasingly complex management strategies – drives up expenses for buy-side firms, at the same time that these industry participants are coping with a challenging compliance environment that obligates companies to navigate a complex framework of rules and regulations. The upward pressure on costs makes it harder for institutions to turn a profit and also keep expenses for their investors from rising too much.
Hedge funds in particular are facing challenges with their fee structure. While they have traditionally charged 2 percent of assets under management and 20 percent of profits, many investors have pushed to negotiate reduced fees.
These investor cost concerns were also noted by lobbying group ICI Global, which replied to the recent ESMA consultation request by stating that the current data charges of European exchanges were “too high,” and emphasizing that “ensuring that prices for trading data are reasonable is critical for investors.”
Buy-side firms concerned about successfully navigating these myriad challenges might consider getting a comprehensive assessment from a managed services provider. Doing so can help them identify key focus areas where they can derive the greatest benefit.