The Investment Management Association (IMA) has asked the Financial Services Authority (FSA) to lead efforts to iron out post-trade market data problems following the introduction of MiFID.
The IMA, which represents UK asset managers, discussed the reduced transparency in the UK equity markets with the UK financial regulator last week at a meeting also attended by banks and market data providers. The trade body hopes to establish an industry-wide working group on the issue by next month chaired by the FSA.
“We would like the FSA to facilitate a market transparency group through which the buy- and sell-side could all get together,” Guy Sears, director of wholesale, IMA, told theTRADEnews.com. “If the shareholder is sitting at the table, the conversations are always slightly better and people seek to try and compromise to find solutions.”
Since the introduction of MiFID last November, UK buy-side traders have complained that the lack of a ‘consolidated tape’ of post-trade market data prevents a complete picture of trading volume and liquidity, thus hampering their ability to make informed trading decisions. In the UK, around a quarter of all equity trades are reported on Markit BOAT, a new over-the-counter trade reporting service, whereas previously all trades were reported on the London Stock Exchange (LSE).
Visibility has been further hampered by MiFID’s allowance for reporting of large block trades to be delayed by up to three days, as well as the practice of some firms to report trades to both the LSE and BOAT.
“There has been a significant degradation in post-trade data in the UK. Much of the buy-side’s analytical tools are really only being populated by exchange data, not by the OTC data going through BOAT and others,” said Sears.
The IMA met with Markit BOAT in January to discuss best practice in trade reporting, but decided that the issue also required an industry-wide approach. “We can’t resolve this through bilateral discussions alone,” Sears said.
The IMA also believes that the creation of standard formats for trade reporting would improve consistency. “We are quite happy to have multiple market venues and multiple data vendors. But if we can agree to some data standards, that could open up the market and allow people to compete without fear that their data can’t get consolidated,” said Sears.