Financial information company Markit is planning to improve the flagging of the post-trade data disseminated by its BOAT over-the-counter (OTC) equities trade reporting and market data service to allow buy-side traders to distinguish available flow more easily.
“We are targeting mid-year 2010 to have consistent usage of the flagging in BOAT data,” Sophia Kandylaki, director and product manager of BOAT at Markit, told theTRADEnews.com.
The firm is keen to ensure that in making available or price-forming OTC flow easier for the buy-side to identify, it does not introduce additional complexity.
“Throughout Europe there are over 200 flags across venues and exchanges, so if BOAT was to implement another 20 flags it would probably distort the picture even more,” said Kandylaki. “The proposal is quite simple and very specific. We are trying to get input from sell-side, buy-side and regulators to standardise the usage of our existing Market Condition flag and consider introduction of a new flag to consistently identify non-price-forming flow. This will allow firms to include or exclude it from any calculations.”
Europe’s buy-side has highlighted problems with the quality and usability of post-trade data as one of its biggest challenges since the introduction of MiFID in November 2007. In particular, traders complain that they have an incomplete view of market activity compared to pre-MiFID, when all OTC trades were reported to the national exchange. While the buy-side can currently access data on OTC equities trades from reporting venues such as BOAT, it is not possible to separate flow that buy-side traders could have interacted with, such liquidity in brokers’ internal dark pools and crossing engines, from trades they could not have tapped, typically voice-broked OTC transactions.
“The buy-side is asking for this information because they would like to accurately measure the liquidity in the market, excluding all the noise from the tape, and they would like to use it for transaction cost analysis purposes,” said Kandylaki.
BOAT was launched in 2007 by a consortium of banks as a pan-European, MiFID complaint reporting and data dissemination facility for OTC equity trades. It is the biggest OTC trade reporting facility in Europe by both value and volume, according to figures from data vendor Thomson Reuters, accounting for 65.14% of reported OTC trades by value and 74.01% of the volume in January 2010.
In addition to BOAT, Markit’s Market Share Analysis (MSA) service, which tracks brokers’ market share of trading in specific stocks, indices, sectors or trading venues. Twenty-four sell-side firms currently contribute data to Markit MSA. The company is currently connecting a further six and hopes to have 40-50 firms, including almost all of the big-name brokers, connected by the end of the year.
According to Niall Cameron, executive vice president at Markit, the service is particularly well-suited to helping the buy-side identify which brokers to use for small- and mid-cap stocks.
“You don’t necessarily want to target your order to dealers that are not active in specific stocks, because you will give information to the market that you are interested in that stock and the dealer may not have the ability to execute for you,” he said. “Markit MSA allows buy-side firms to target their liquidity and target their information around their liquidity.”