The London Stock Exchange is considering the possibility of joining NYSE Euronext in unbundling post-trade data, a move that would help to clear one of the key obstacles to a consolidated tape for Europe.
Most exchanges list a single bundled rate for pre- and post-trade data. For example, the London Stock Exchange charges £26.50 (€29.33) a month for UK level 1 data, Deutsche Börse levies €56 a month for automatically-updated level 1 data (or €20 for the non-automatic source) and Nasdaq OMX Nordic’s level 1 data fee is €19 a month.
“We have heard [the calls] from clients and market participants and we are engaged with them about how we might deliver an appropriate solution,” Jarod Hillman, head of real-time data at the London Stock Exchange, told theTRADEnews.com. “We want to ensure our post-trade, on-book data is available to clients in a variety of service options that cater for the evolving manner in which they consume this content. We are currently reviewing our product range and evaluating options.”
For some, the lack of separate post-trade data pricing is a major hurdle to creating a cost-effective pan-European consolidated tape. “Bundled pre- and post-trade data pricing is the core issue stopping the consolidated tape at this point,” said Niall Cameron, executive vice president and market data firm Markit, which runs the BOAT over-the-counter reporting and data service. “Unbundled pricing would remove a major block to the free market creating a consolidated tape.”
Markit BOAT reduced the price
for its pan-European OTC equities post-trade data feed from €120 a month to €40 on 1 January this year.
Consolidated European post-trade data sources are available from market data vendors, such as Thomson Reuters’ .xbo service. However, users need to subscribe to the individual exchanges’ market data offerings, which can be costly. Cameron estimates that the monthly cost for a consolidated tape would be €500 based on exchanges’ current bundled data charges.
“If all the players offered a pre-trade, post-trade and a bundled price, consolidators could put together a post-trade tape for a very reasonable price,” said Cameron. “Typically from an exchange perspective, the value of the post-trade piece of the bundle is a smaller percentage than the pre-trade.”
NYSE Euronext is one of the few exchange groups in Europe that offers unbundled pre- and post-trade data for its European regulated markets. Its full order book bundled data rate for the Euronext markets is €90 a month, while its Cash Last Price post-trade-only service is €16 a month.
The cost of accessing consolidated pan-European post-trade data is a major concern to buy-side traders. The buy-side considers the current cost of creating a consolidated tape too high for most potential users, according to a white paper on European data consolidation published by Thomson Reuters in January. The 20 buy-side firms interviewed for the paper cited exchanges’ bundled data rates and the incremental cost of subscribing to data from OTC reporting facilities such as BOAT as the reasons for the high cost.
Thomson Reuters suggested that a revision of MiFID could force execution and trade publication venues to make their data available for inclusion in a consolidated tape “at a much lower price than is currently the case, ideally at marginal cost”.
Others have criticised what they perceive to be the high cost of exchange data in Europe. Chi-X Europe CEO Alasdair Haynes said that while US traders pay a one-time fee for all their post-trade equity market data, European firms may need four or five data terminals from the various exchanges they trade on, each with a separate cost. He estimates that data is five to six times more expensive in Europe than the US on a value basis and 14 times more expensive on a per-share basis. “You need to ask what the data held by incumbent exchanges is truly worth,” said Haynes. “Incumbents’ market shares have dropped to 55-60%, yet they are charging the same amount for data. That can’t be right.”
Cameron at Markit suggests a fair price for a “properly organised consolidated tape” would be between €60 and €100 per month. Tony Whalley, investment director at buy-side firm Scottish Widows Investment Partnership, said he would “certainly be prepared” to pay a price in that range for a consolidated tape.
However, exchanges are unlikely to take multilateral trading facilities’ route and offer post-trade data free of charge.
“We would argue that post-trade data from an order book like SETS has an inherent value because it is a highly liquid order book and the data is published at millisecond latency, whereas you also have other post-trade data that is delayed for three minutes but deemed real-time,” said Hillman at the LSE. “There are flavours of value within the total offering, and post-trade data from a venue such as the LSE, which is constantly investing to make sure its trading and information systems perform and publish with minimal latency, means our market data is more valuable than some other venues.”