Turquoise Introduces Charges For Use of Market Data

Terry Flanagan

Turquoise has become the latest pan-European trading platform to charge for use of its market data.

Now the second-largest multilateral trading facility (MTF) in Europe with a market share of around 5%, Turquoise, which is owned by the London Stock Exchange Group (LSEG), is following the lead of Bats Chi-X Europe, Europe’s largest MTF, and will implement a fee structure for market data from the start of November.

“Turquoise has continued to grow its market share over the past few years [since its launch in 2008], so the data itself is now more comprehensive,” a spokesperson for the LSEG told Markets Media. “Now is the right time to introduce the charge; obviously there is value to the data. Others have introduced market data fees as well.

“It ensures that the overall cost of trading remains competitive. Since the introduction of MiFID, MTFs have brought down the costs of trading and this is part of that to ensure the overall costs remain as competitive as possible.”

Turquoise will charge £10 per user per month for Level 2 standalone data and £10,000 per annum for non-display data for pan-European equity data. Turquoise says that its fees are considerably lower than any other European exchange. It will continue to provide its market data on derivatives for free and there will be discounts for those also subscribing to London Stock Exchange data.

A weak trading environment has eaten into the profits of European exchanges but revenue from market data prices, estimated to bring in €1 billion a year collectively for the incumbent exchanges, has been less affected as exchanges are the only providers of their trading data. This has led to complaints that their charges are excessive.

In May, Bats Chi-X Europe, the region’s largest equities trading venue by market share, buoyed by an approximate 25% share of the pan-European equities market, became the first MTF to charge its customers to use its market data in a bid to challenge the higher fee model charged by incumbent exchanges, such as the London Stock Exchange, Deutsche Börse, Nasdaq OMX and NYSE Euronext. Exchanges say that profits made from data fees are reinvested in their technology.

Bats Chi-X Europe’s scheme comes into effect from October. It also plans to charge users on data usage—distribution, non-display and terminal display fees—unlike incumbent exchanges that generally charge one set fee regardless.

MTFs, which generally offer cheaper prices and newer technology than the national exchanges, have grown in prominence in the European exchange space since the arrival of the original Markets in Financial Instruments Directive (MiFID) in 2007, a key piece of securities reform which paved the way for more competition, and incumbent venues have seen their previously monopolistic market share eroded significantly.

While MiFID succeeded in encouraging greater competition by increasing the number of trading venues, the resultant fragmentation of liquidity makes it difficult and expensive to verify trade executions, provide accurate post-trade reporting and value assets in funds and portfolios.

The updated version of MiFID, which is currently snaking its way through the European Union’s corridors of power, has also stated that market data must be made available on reasonably commercial terms. The European Commission, which considers the transparency of market data critical, is championing a commercial competitive approach to the development of a European consolidated tape— a mechanism which publicizes post-trade information as to the prices and sizes of transactions in financial instruments which are executed on organized venues—instead of a process to pick a single provider or one mandated by the European Union. In the U.S., all reportable trades are made available to a non-profit seeking entity and published via a single consolidated tape that continuously reports the latest price and volume data on sales of exchange-listed stocks.

“The fragmentation of the market achieved under MiFID I has also led to a fragmentation in data collection, and therefore to a deterioration in data quality,” the House of Lords’ European Union Committee said in a report last month entitled ‘MiFID II: Getting it Right for the City and EU Financial Services Industry’. “We support the case for the creation of a timely consolidated information tape and urge the European Commission to take urgent steps to bring this about.”

While there is agreement within the European Union that a consolidated tape is needed, especially among the buy-side community who want a consolidated tape for European equity markets to log the the best bid, offer and execution prices, there is currently no final consensus as to the form of the tape and how it will be operated.

When Bats Chi-X Europe made its announcement in May, it hoped that its move would accelerate plans for a Europe-wide consolidated tape.

“With our new pan-European market data pricing, which in some cases is up to 10 times less than the aggregated fees of the major primary listing exchanges, we aim to set a reference point that will focus industry debate on what constitutes ‘reasonable commercial terms’ for pan-European data, whilst creating competition to help drive down overall data fees,” said Mark Hemsley, chief executive of Bats Chi-X Europe at the time.

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