Market data debate reignites at TradeTech

Arjun Singh-Muchelle, IMA: The lack of a European consolidated tape is disappointing

The European Commission’s MiFID II legislation has produced a disappointing outcome for those hoping for a consolidated tape of post-trade data, while exchanges continue to bear the brunt of participants’ anger over the price of market data.

“The earliest we could get a consolidated tape is 2020. That’s very disappointing,” said Arjun Singh-Muchelle, senior advisor, regulatory affairs at buy-side body the Investment Management Association at the Trade Tech conference in Paris. “Some say data is expensive because of fragmentation. That’s rubbish. Of all equities traded in Europe, over 50% is traded on just three venues and 75% is traded on just six venues.”

Singh-Muchelle added that the average market data feed cost was around $800 per dealer in the US, whereas in Europe the cost is closer to $16,000. The IMA, he said, is calling for a cap on the total level of revenues that stock exchanges can make on market data. “I want DG Competition to do a competition investigation in this space, because there may be a hint of market failure.”

Under MiFID II, there will be a consolidated tape of post-trade market data but the Commission stopped short of appointing a single provider, instead leaving it up to the market to decide. Industry observers have expressed concern that the requirement to provide the data at a “reasonable” price to all participants while complying with strict standards makes the proposition unattractive to most potential vendors – leaving the industry with no solution.

“The big failure of MiFID one was the lack of quality data, but by 2016 we will start getting the data, and it will be thanks to the new legislation,” said Maria Teresa Fabregas Fernandez, head of unit DG Markt. G3 securities markets, financial services policy and financial markets, Internal Market and Services DG, European Commission. “We decided at the first stage not to go for a single European consolidated tape. Because we are still working to improve the standards for data collection, we gave a change to the industry to develop the tape. But if this fails, in two years’ time there will be a regulatory consolidated tape, provided at a reasonable commercial basis.”

The issue has been contentious for a long time, with many senior representatives of the sell-side, trading platform operators and the buy-side calling for a consolidated tape and a reduction in market data fees. Miroslav Budimir, senior vice president at Deutsche Borse attempted to argue that the reason market data is more expensive in Europe than the US is because the US has more trading venues.

“European market data is slightly more expensive than US data, but there’s a good reason,” he said. “The US has 13 venues. Europe has 65. In the US you have one set of rules. In Europe you have 28 member countries of the EU.”

However, Budimir’s contribution was interrupted by session moderator Richard Balarkas, chief executive at Quendon Consulting, who asked whether anyone present in the audience actually believed that there are 13 venues in the US. A member of the audience could be clearly heard shouting “Rubbish!” to which there was general audience applause.

Budimir added that Deutsche Borse and other European exchanges are currently working on the MMT Market Model Typology project, which he said would help to fix the lack of OTC and systematic internaliser data in Europe. The MMT is a collaborative effort established by exchanges, data vendors and reporting venues, which aims to achieve a ‘practical and common solution’ for standards on post-trade equity data. This project was initiated by the Federation of European Securities Exchanges and now is under the jurisdiction of the FIX Trading Community.

According to Singh-Muchelle, the market data issue is tied to the question of transparency and market impact. While the European Commission is currently seeking to introduce volume caps on dark pools in an effort to redirect more liquidity to the lit markets, Singh-Muchelle suggested that this ignores the clear advantages to the buy-side of trading in the dark.

“In February 2014 the average price improvement in dark in Europe was 14.21 basis points in comparison to the most aggressive lit venues,” he said. “That should raise serious questions about what’s happening on the lit venues. As for the volume caps, the 15 worst affected names are  FTSE 250 firms such as Carphone Warehouse and other smaller and medium sized enterprises. If the regulator is serious about supporting the SME market, more evidence based decision making is needed.”