Proactive Investors - Jefferies has reiterated its buy rating on the London Stock Exchange Group PLC (LON:LSEG), with a price target set at 11,000p, with the positive stance buoyed by the impending final report from the Financial Conduct Authority's (FCA) Wholesale Data Market Study (WDMS).
WDMS is an in-depth investigation into the competitiveness of the wholesale data market, specifically focusing on benchmarks, credit ratings data, and market data vendor services.
The study aims to address concerns related to limited competition in these markets, which could lead to higher costs for investors, less effective investment decisions, and barriers for new firms entering the markets.
Jefferies anticipates a pragmatic regulatory approach from the FCA that avoids the need for a Market Investigation Reference (MIR) to the Competition and Markets Authority (CMA) concerning market data vendors (MDVs) and benchmark indices, suggesting the Treasury might extend the FCA's regulatory scope to encompass MDVs directly.
Jefferies underscored the significance of the benchmarks and MDV markets, highlighting the FCA's concern over competition and market concentration.
Specifically, the bank mentioned the £3 billion generated from sales to UK-based MDV customers in 2022, with a notable concentration of revenue between two major providers, Bloomberg and LSEG-owned Refinitiv.
Despite identifying potential competitive harms, the FCA has not yet concluded that these warrant a significant adverse effect on competition.
Jefferies outlines potential remedies that might emerge from the FCA's final report, including cost-based licensing for market data and measures to ensure historical data remains accessible for regulatory and audit purposes without time constraints.
The report also touches on the broader industry context, pointing out the high levels of vertical integration in the wholesale data value chain, which could be contributing to competitive distortions.
In its analysis, Jefferies also highlighted the LSEG's robust position in the global financial markets infrastructure and data business, with a diversified portfolio spanning data and analytics, capital markets, and post-trade services.
LSEG shares were swapping dor 8,840p as of 9.45am, 19 February.