Consolidated Tape
MiFID did not mandate a market- wide consolidated tape, as opposed to the NBBO ( National Best Bid and Offer) provided under Reg NMS, and the lack thereof is one of the key concerns raised by the buy-side in a range of forums. There is however, no significant issue with data aggregation offered by a number of key providers such as Bloomberg and Reuters; in addition to some strong fragmentation analysis products available to the market (Fidessa Fragulator, BATS Europe).
In a period of time where cost base is under increasing pressure, attention has now been drawn to the inherent impenetrable conditions that exist in market data (the LSE has sole distribution rights on LSE data, Deutsche Boerse on Deutsche Boerse data etc.), and as the number of venues from which the data is required for increases, so will the interest placed on the associated charges. In an environment with considerable focus on competition, competitive forces cannot work to reduce the fees, leaving regulation as the only option, which was again addressed under Reg NMS in the US.
Benchmark consistency is another issue in Europe. In the absence of a market-wide mandate for what constitutes the “tape,” questions will be raised around benchmarks and venue coverage. What is the VWAP price for a given stock over a given period? Does it include all “Lit venues,”or just some? Do clients need to be aware that they are 10% of different volumes, when trading with different brokers for example? The short answer to the last question is currently “YES”.
The critical problems that exist are more in terms of data clarity, and not so much in delivery-quality, as is often levied. Trade reporting flags are very non-specific at present, based on the terms specified by MiFID. Increasing the number of flags that the trades are reported under will significantly increase the usefulness of this data.
The buy-side is typically most outspoken on the subject, but their concerns around price discovery, liquidity visibility and TCA / benchmarking are equally applicable for broker-dealers. In addition, the information is extremely valuable for use in both algorithmic signal engines and market share assessment for the broker-dealers as well.
We think that it is the point around reporting flags that needs to be addressed by broker-dealers, trading venues and trade data monitors (e.g.BOAT), to provide a platform for self-regulation to move forward in 2010.
Touching the Points
