Are we nearly there yet?

There has been a small flurry of activity this week around the subject of a European consolidated tape, but is the fog starting to clear yet? Let’s take a closer look at the facts.

The parliament adopted text of MiFID II calls for an effective and comprehensive consolidated tape to be in operation as soon as possible. The scope is post-trade data for equities and equity-like instruments, though non-equities will follow later. The objective, as far as MiFID II states, is that such a tape should contribute to “creating a more integrated EU market and make it easier for market participants to gain access to a consolidated view of trade transparency information”. There are still some inconsistencies in the text around data that an Approved Publication Arrangement (APA) must provide and that which a Consolidated Tape Provider (CTP) must make available, and also in respect of the timings cited around delivery of a solution(s), ESMA reporting on the success of the venture and the EU taking the wheel. But details can be ironed out in the trilogue as this gets going over the coming months. The proposed MiFID II data reporting services are outlined below:

The circular nature of the data flow poses the interesting question of ownership, with market participants providing and consuming data for their own trades. Trades will be reported to an APA – think Trade Data Monitor (TDM) in the UK. APAs have the job of ensuring the consistency and quality of the data and enabling the delivery of a consolidated tape. Data provided for consolidation by the APAs will adhere to common formats and standards, to be defined by ESMA.

CTPs will collect the trade report data from the APAs and provide, the parliament says, a continuous electronic live data stream of real-time price and volume data per financial instrument. Language not that conducive to post-trade data! CTPs must make the information available to the public as close to real-time as is technically possible and on a reasonable commercial basis.

MiFID II envisages a number of competing commercial CTPs who will be required to be authorised, as are APAs. The Commission reserves the right to establish a single entity to operate a consolidated tape for post-trade information in the event that no CTPs emerge or those that do are not up to scratch.

Since MiFID in 2007, a number of data collectors and aggregators have emerged to deliver data consolidation as bespoke data feeds and as essential parts of their trading platforms. (We ourselves provide a number of web-based tools for this purpose on our Fragmentation site). However, with the structure and the common standards approach that MiFID II proposes, one vanilla flavour of post-trade data would be achievable for those who have the appetite.

The main barrier to any real-time consolidated tape remains the high cost of market data and ESMA is yet to define what it means by “at reasonable cost”; capturing the entire market in accordance with user-friendly standards at a reasonable cost is a tall order. Who will step up when the commercials are so unclear? Logically the entire market is the universe of most interest to the regulator for market supervision, but is an all-encompassing tape what the end-user wants? With standards in place consolidation of standard tapes could make up that universe, without each CTP covering the entire market. Allowing users to subscribe to the market instruments that they are interested in consuming makes market data more accessible. After all, MiFID II also tells us that data should be made available in an “unbundled” fashion in order to reduce costs.

Keep your fog lights on, there’s still a way to go yet!

6 Responses to “Are we nearly there yet?”
  1. Reg Pritchard says:

    ESMA also has yet to define what it means by “making available to the public” in terms of data usage rights. For example rights of individual members of the public to use data as solely for the management of their own private investments are already widely available from most exchanges at low fees. Rights of institutions to process exactly the same data for commercial purposes such as index creation, pricing of derivatives etc have very little to do with making the source data available to the public and could reasonably be expected to cost more than private investor fees.

    Unbundling data usage rights could make far more sense in practice than unbundling data content.

    • Yes, good point. We in fact attempted to lead into this by establishing a new license for consolidated data in addition to assembling the tape itself. The idea would be that the consolidated tape license would have retail pricing options as well as licenses for index calcs, pegging, etc.

      As you say, exchanges have done the same for their underlying products today and in fact have also unbundled their licenses to allow post-trade data to be licensed seperately from pre-trade data.

      It is important that commercial data licensing recognises the relative value of each use case but in a standardised way so that the market can more easily source and comply.

      We feel it is also critical for the commercial model to recognise the relative value contributed by each exchange/market participant and that participation be open to all tape contributors effectively democratising the market data business. The US CTA model does not do so which means the revenue allocation is available only to exchanges and the allocations they receive reward a technical trade report on an equal basis to that of a closing auction price. Our proposal takes all of this into account and is the result of a thoughtful consultation.

  2. Perhaps your fog lights could use a little cleaning. In the small flurry of activity, you may have missed the main point which our proposal addresses – deliver reasonable cost for consolidated data.

    A few other points you may have missed:
    – Post-trade data and real-time are not mutually exclusive
    – “Unbundled” refers to the separate availability of pre-trade and post-trade data so as to lower the cost of furnishing a post-trade tape
    – Users want lower cost; regulators want the tape to be all encompassing

    Our plan delivers on all of the above and is acceptable to all stakeholders.

    Further, what Brussels wants and what the market needs is actually quite clear. As a provider of solutions, Fidessa should turn off its smoke machine and start solving.

  3. Anne Plested says:

    Thank you Reg, I agree it is key who ESMA will define “the public” to be here. MiFID II aims to ensure that post-trade equities data is “made available to the public at reasonable cost”. This could be a price ticker in the window of a regional stockbroker for the man on the street to see today’s Vodafone price.

  4. Reg Pritchard says:

    We need to bear in mind that agreement about standards to support data consolidation, delivery of consolidated data and what various recipients pay for various rights to use that data are three very different things.

    If “making data available to the public” is also defined as making the data available for ANY use by ANY organisation, the task of (i) specifying “reasonable cost”, (ii) ensuring the cost remains reasonable over time as data usages change and (iii) ensuring the consolidated market data fees regime complies with anti-competition laws becomes massive.

    If MiFID requirements for data fees are more closely defined, for example by requiring all relevant data licence agreements to specify separate and reasonable fees for the use of data by private investors and by corporations for regulatory compliance purposes, there may still be an operational and regulatory requirement for a single consolidated feed (not my area), BUT:

    a) there may be no need to have all fees for consolidated European market data set and administered by a single body,

    b) the COBA proposal, for all its merits and attractions, will not necessarily affect the fees that corporations pay for commercial data usage rights that are deemed to fall OUTSIDE the scope of MiFID/MiFIR.

  5. Anne Plested says:

    Thank you for your comments Mark. It seems I was not the only one for whom your open letter ( came as a bit of a surprise. Other stakeholders left to find their way through the fog include the IMA, together with all those market participants not included in the list of 50 firms you have contacted.

    It’s true when you say that “what Brussels wants and what the market needs is actually quite clear” but the problem is that they want different things. The market needs a neutral means of measuring and proving execution quality, whilst MiFID II is aimed at the man on the street being able to instantly “see the price” of any common stock. So “reasonable cost” does rather depend on who the consolidated data is being consumed by and for what purpose.

    I also agree that pre- and post-trade data do go hand in hand in the wider debate, but MiFID II is primarily concerned with post-trade data consolidation, recognising that lessons can be learned before widening the scope.

    As regards “unbundling”, the MiFID context is indeed based upon the separate availability of pre- and post-trade data, which most EU exchanges are already committed to, but talking to asset managers they also want the choice to pay for individual data items at a more granular level. On top of this, the wider discussion on the future of data provision, value and cost brings many different commercial interests to the table with calls for price regulation that would likely sit with the competition authorities, not just within MiFID.

    I am sure that this round of debate will continue for some time yet. Certainly this site (and the Fidessa Fragmentation website) aims to provide a transparent, fair and accessible approach to this and other issues our industry faces.

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