Leading industry players are calling for European policy makers to intervene and provide greater detail on how a competitive consolidated tape for Europe would work, fearing exchanges will not reduce data costs on their own.
“We need a framework for consolidated tape which covers commercial as well as functional aspects of delivery,” insisted Robert Barnes, CEO of UBS MTF, at a panel session last week organised by standards provider FIX Protocol Limited (FPL).
A consolidated tape for Europe was viewed by FPL members as one of the most important outstanding issues in MiFID II yet it was doubtful a solution could be found without guidance from watchdog, the European Securities and Markets Authority.
“There are times when regulators can and should step in to help solve problems the industry cannot solve itself. This is one of those times,” agreed Chris Pickles, co-chair of the FPL global education and marketing committee and head of industry initiatives, global banking and financial markets, BT.
In the first draft of MiFID II, the European Commission proposed three different solutions for creating a consolidated tape; a commercial solution with competition among providers, use of a single provider selected via tendering, or the appointment of a vendor to run the tape as a utility. The commercial solution was favoured by the Commission. The Council of the European Union is currently making its own revisions to MiFID and is belived to favour the single provider option.
“Competition has been there in the trading space for quite some time now, but the existence of a market data offering from alternative sources has so far had no effect on the cost of market data from exchanges. This is where regulation must step in, said Duncan Higgins, head of electronic sales, ITG.
How to price a consolidated tape has been discussed by a number of bodies, including the COBA Project, led by Graham Dick, former head of business development at Chi-X Europe, and Mark Schaedel, former global head of market data at NYSE Euronext. The initiative outlines what it considers to be a “reasonable cost” for a consolidated tape, including €69 for addressable liquidity, €39 for reporting events, i.e. technical trades that investors could not have necessarily participated in, and €99 for a pan-European best bid and offer feed.
Dick told theTRADEnews.com in November that the fees COBA came up with were based on a commercial and quantitative model developed and shared with the exchanges.
Barnes cited Markit BOAT as an example of an industry solution compliant with MiFID’s harmonised transparency framework.
“Today, some 50 firms including multilateral trading facilities send reports to Markit BOAT, and Markit indicates 80% of these reports are available in real time,” Barnes said, adding the industry also needs some regulatory prescription to define a common standard for flagging trades, time stamps and which venues to include to secure confidence in a record of reference.
Once the Council has completed its reading of MiFID II, it will reconcile its draft with that of the European Parliament.