Esma Consults On Market Data, Consolidated Tape

Shanny Basar

The European Securities and Markets Authority has launched a consultation on the cost of market data and the launch of a consolidated tape for the region which the buy side said is necessary to plan executions with confidence.

The FIX Trading Community London regional meeting discussed the possible production of a consolidated tape on July 8.

Rebecca Healey, co-chair EMEA regional committee and EMEA regulatory subcommittee, FIX Trading Community and head of EMEA market structure and strategy at Liquidnet, said the FIX regional committee had recently attended workshops with the European regulators in Brussels to discuss a tape.

She said at the meeting: “There is a political will to deliver a European consolidated tape, especially for retail investors. A post-trade tape for equities could be close to being delivered.”

Huw Gronow, co-chair EMEA investment management subcommittee, FIX Trading Community and head of dealing at Newton Investment Management said at the meeting that a post-trade tape is necessary to give the buyside an accurate view of what has been traded and what liquidity is not accessible so they can plan executions with confidence.

“The buy side currently has to work with data that is not standardised and continues to be inconsistent,” he added. “Accuracy is extremely important for portfolio construction and to assess the impact of executions on alpha.”

Gronow said it would also  be useful to have differentiated FIX tags for systematic internalisers, risk trades and non-addressable liquidity.

Rebecca Healey, Liquidnet

Healey continued that for the first time European regulators look close to endorsing the use of FIX MMT given the wide industry support for the initiative.

The MMT (Market Model Typology) initiative is a collaborative effort established by the broad range of industry participants in FIX to develop consistent standards for post-trade data across all asset classes subject to the MiFID II regulations.

Cathy Gibson, head of dealing at Royal London Asset Management, said at the meeting that a consolidated tape will bring more transparency and cheaper data.

“However, regulators should realise that best execution does not just equal best price,” added Gibson. “It makes sense for equities but cannot just be transferred into fixed income.”

Esma consultation

Esma today launched a public consultation on the development in prices for pre- and post-trade data and on the post-trade consolidated tape for equity instruments.

The consultation paper will review the MiFID II provisions aimed at reducing the cost of market data: the requirement to publish market data on a reasonable commercial basis, the requirement to provide market data in a disaggregated format, and the requirement to make market data available free of charge 15 minutes after publication.

The regulator said in a statement: “However, to date, no consolidated tape has emerged and, based on Esma’s analysis, it appears that MiFID II has so far not delivered on its objective to lower the prices of market data.”

Esma added that in data users’ view, market data prices are too high and have not decreased since the start of MiFID II in January 2018, while in some cases prices have significantly increased. However, the regulator said majority of trading venues have a different perception of the development of market data prices, that, in their view, resulted in price adjustments, and not only increases.

Steve Maijoor, Esma

ESMA believes the lack of a consolidated tape provider can be explained by three main factors – no commercial rewards for operating a tape, a too restrictive regulatory framework, and competition from non-regulated entities. Esma’s consultation also identifies some of the major considerations in setting up a tape, notably high data quality, mandatory contribution by trading venues and mandatory consumption by data users.

Steven Maijoor, chair of Esma, said in a statement: “We have received a lot of feedback as to whether the price for market data is reasonable, in addition to concerns on price increases and new fees in an environment driven by technological development and a high demand for market data. Establishing a consolidated tape in the EU has been discussed for many years.”

The consultation closes on 6 September 2019 and Esma intends to submit a final report to the European Commission in December 2019.

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