Swiss exchange and trading infrastructure firm SIX Group has taken a step back from its proposed fee hike for non-displayed trading venues using Swiss data after the Committee for European Securities Regulators (CESR) ruled to allow multilateral trading facilities (MTFs) to use their own data to create a mid-point reference price, at which trades on their dark pools could be matched.
SIX Exfeed, the market data distribution arm of SIX Group, issued a new pricing scheme based on a consultation on reference markets and the principles of real-time reference data pricing, which ran from November to December 2010. Having assessed feedback from buy- and sell-side market participants including the Association for Financial Markets in Europe, a brokers' lobby group, SIX Exfeed decided to replace the annual distribution fee for execution venues with a new licence fee for information usage by non-displayed liquidity venues.
The new reference price-based system offers a tiered structure under which trading venues with up to 50 participants pay SFr10,000 (€7,750), those with up to 250 participants pay SFr20,000 (€15,500) and those with more than 250 participants venues pay SFr30,000 (€23,250) for the data. This is substantially lower than the SFr100,000 (€77,500) flat annual fee for data provision to multilateral trading venues proposed by SIX in April 2010.
“We tiered the structure as a result of our consultation in which people asked that different sizes of venues be taken into account,” said Werner Bürki, CEO, SIX Exfeed. To ensure clarity of who the fee applies to, the definition of the application of data has been changed as well. Bürki says it had been described as ”usage of data by execution venues' but SIX Exfeed has now adopted the definition as given by industry body Software & Information Industry Association's Financial Information Services Division of ”non-displayed market data usage'.
The consultation was launched after MTFs objected to SIX Exfeed's proposed fee hike. One MTF, Chi-X Europe, approached its regulator, the UK's Financial Services Authority, to establish whether it could use reference data from its displayed liquidity venue as a source for a mid-point reference price on its Chi-Delta dark pool.
In late December, CESR updated its own rules on reference price waivers to allow dark pools to widen the range of acceptable reference price source. The regulatory body, which has now been superseded by the European Securities and Markets Authority, added a new example of an acceptable scenario for a price waiver, in which an MTF could create a price based upon the best bid and offer where “the best bid on the reference market is the highest binding bid price of the MTF and the best offer on the reference market is the lowest binding offer price of the MTF”.
This revised guidance allows an MTF to use its own data if it satisfies regulators that the price data is reliable. To do so the bid and offer prices must be consistent with other markets, widely published and supported by sufficient volumes of trading. The MTF must also have consulted market participants on their views.
Bürki said, “We still believe that price generated on our platform, provided there is major part of the liquidity generated on that platform, is superior to a price generated on an alternative trading venue.”
SIX Swiss Exchange and SIX Exfeed have said they will continue to be actively involved in the debate on further development of the regulation of financial markets both in Switzerland and Europe.