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FESE welcomes ESMA’s consultation on ‘guidelines on the MiFID II/MiFIR obligations on market data’ and appreciates ESMA’s recommendation in its MiFID II/MiFIR Review Report No. 1 to continue the “transparency plus” model. We agree with ESMA’s intention to increase clarity, consistency, and transparency of the market data regulatory obligations. This is why, in line with some of ESMA’s findings and proposals, over the course of 2020, FESE identified potential recommended reference terms (RRTs) and best practice recommendations (BPRs) for market data providers. Our response to the Consultation Paper partly draws on these RRTs and BPRs.
FESE is supportive of ESMA in pursuing the “transparency plus” approach with a view of seeking more comparability and transparency. That being said, it is important to tread carefully in this complex area, since there is a fine line between requirements aimed at increasing transparency and requirements that may be unintentionally more intrusive by nature and, as such, are unwarranted, given that there is no evidence or reason to justify a more intrusive approach.
In order to evaluate the changes in the overall costs of market data, it is important to look at the wider market data ecosystem. “Exchange” market data can be distributed via intermediaries to brokers, asset managers, and other market participants, and is only a small part of the “overall” market data used by market participants, which also includes news, alternative data, research, ratings, valuation data, reference data, etc. The consulting firm Oxera conducted an analysis, on behalf of FESE, of data from European firms which showed that exchange market data fees account for less than 10% of total sell-side market data spend and 0.5% of total buy-side market data spend. Since 2012 the market data revenues and the unit costs (calculated as the total joint revenue from trade execution and market data as a proportion of total value of trading in relevant securities) have remained stable overall.
FESE believes that a holistic approach towards assessing market data is needed. The role that trading venues play in delivering the Capital Markets Union, as well as the importance of the price formation process, needs to be considered. The market structure in which market data is produced and consumed is complex, making it challenging to assess the role and impact of regulatory intervention. In this context, regulators and policymakers should be wary of enabling free-riding or other potential unintended consequences which, if left unchecked, could ultimately threaten the quality of the price formation process and unintentionally contribute towards creating an unlevel playing field in terms of competition.
FESE looks forward to continuing its cooperation with ESMA on the MiFID II/ MiFIR obligations on market data.