The executive summary has some valuable insights and recommendations. For example, we fully support the statement though we would suggest an important addition...
EFAMA, ICSA and MFA (the Associations) have read IOSCO’s Feedback
Statement on “Market Data in the Secondary Equity Market” following the
IOSCO consultation in 2021, and warmly welcome its conclusions.
The Associations would like to draw attention towards the executive
summary in particular, where a number of valuable insights and
recommendations are presented. For example, we fully support the
statement below, though we would suggest an important addition:
“Market data and access to market data are necessary to trade in the
secondary markets. Market data is an essential element of efficient
price discovery and helps to support fair and efficient markets. Market
participants, including investors, need timely access to market data to
make investment, order routing, liquidity management and
trading decisions. Further, market data is necessary for market
participants to comply with certain regulatory requirements, including
risk management, best execution and order protection rules, where
applicable. As the markets have evolved to become largely electronic,
the market data needs and means to access such data have likewise
changed for many market participants. Market participants in many
jurisdictions have raised concerns about the content, costs,
accessibility, fairness and consolidation of market data…”
In the recommendations aimed at regulators, IOSCO stresses that:
- Fair access to market data is an important consideration in the provision of market data to market participants.
Fair access may cover issues including market data pricing,
connectivity terms and pricing, and contractual arrangements. Market
data is not interchangeable in all cases, and where appropriate, helping
to ensure fair access across different execution venues is an important
consideration. In addition, the extent to which access to free or
delayed data can meet the needs of some participants may be a useful
consideration.
- Where appropriate, consolidation of data may improve access
to market data and may, in some circumstances, be useful in helping to
reduce costs of market data, identify liquidity and compare execution
quality in jurisdictions where there may be fragmented liquidity.
We strongly support the notion of ‘fair, equitable and timely’ access
to market data as mentioned at the outset of the IOSCO report. We see
great value in consolidated data, though consolidated tape data should
also be subject to fair and equitable access based on a reasonable
commercial basis.
EFAMA, ICSA and MFA believe that the IOSCO Recommendations could
further be enhanced by the following Core Principles, which are relevant
across jurisdictions.
The Core Principles should entail:
1. The price of market data and connectivity must be based on
the efficient costs of producing and distributing the market data (as
opposed to the value market participants derive from market data) with a
reasonable mark-up. The cost should be measured against a recognised
cost benchmark.
(a) Regulators should require trading venues to submit detailed cost
and revenue data in order to understand the amount of mark-up
exchanges impose.
(b) As market data should be based on cost with a reasonable
mark-up, exchanges should simplify contract terms and eliminate
“non-display” categories. Instead, exchanges should consider simply
differentiating between professional and non- professional users.
Please see the IEX’ cost study and Copenhagen Economics guideline to
a cost benchmark for inspiration in addressing principle one in more
detail.
2. Trading venues of a single market system
should standardize key market data contract definitions, terms and
interpretations. Contract definitions, terms and policies should be
specific and avoid overly broad or general terms.
(a) Market data licensing contracts should avoid “derived data”
terms, which are lopsided and unfair and standardized agreements should
be subject to regulatory review.
3.
Market data licensing contracts should be simplified to ease administration and so that audits are not necessary.
EFAMA
© EFAMA - European Fund and Asset Management Association
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