The UK’s Financial Conduct Authority (FCA) is looking into potential breaches of competition law after a consultation revealed that benchmark index prices have been increasing, reported The Financial Times.
The UK financial watchdog’s decision to launch an investigation into index providers’ business practices was prompted by concerns that “competition may not be working well in the provision of benchmarks.”
Benchmarks are used by asset managers and other financial services firms as a reference for index-tracking funds, and to evaluate active managers’ performance.
However, “competition problems may be causing users to pay prices above the competitive level, which potentially can translate into higher costs for end investors,” the regulator stated.
According to the respondents to an FCA’s consultation, multiple barriers to switching between benchmarks exist and the complexity of licensing terms makes it difficult to compare different index providers’ offers.
The regulator laid out its plans to probe index providers last week in a feedback statement on accessing and using wholesale data, including benchmarks, market, and trading data.
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