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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:
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.