FESE Members Deliver On Their Commitments To Facilitate Equity Market Data Consolidation

In July 2010, FESE members committed[1] to a number of key steps in order to further contribute to an industry-led efficient consolidation of equity market data. The purpose of this report is to give a progress update and further details on the on-going work of FESE members to market participants and policy makers.

Context of FESE’s actions:

Regulated Markets (RMs) fully support the industry-led consolidation of equity market data. RMs’ data is of excellent quality, widely available, easily consolidatable with other data, and provided to users at a reasonable cost. According to a recent research study entitled “The cost of access to real time pre & post trade order book data in Europe,”[2] the expenditure on the cost of data from exchanges accounts for 8% to 15% of total data consolidation costs. The study also shows that the cost of data charged by the largest exchanges in Europe (75 EUR a month) is about the same as the cost charged in the US (70 EUR), a market often cited as a reference point. Thus, exchanges’ user fees are not only commensurate with the value and the quality of RMs’ data, but they also represent only a minor portion of the overall cost of consolidation in both absolute and relative terms.

Progress report on FESE commitments:

1. By end-2010[3]: Making post-trade data available separately from pre‐trade information at a reasonable cost

In July, FESE members committed to offering a post-trade data product separate from pre-trade data at a reasonable cost in order to facilitate a more cost-effective availability of real-time posttrade data. According to research study cited above, the adoption by various exchanges of a separate post-trade product has already reduced the cost of data due to exchanges by 62.5% (from 200 EUR to 75 EUR). The introduction of such a product by all FESE members will produce further cost savings for investors. Therefore we are pleased to report that all FESE members have either already introduced or launched plans to introduce separate post‐trade products.

2. By Q4 2010: Making the public display of 15-minute delayed data free of exchange fees for all end-users

   In July, we committed to offering 15-minute delayed data free of exchange fees for all end-users. At that point, most FESE members were already providing such a service. However, we believed that it would be useful to formalise this practice and widen it to cover all FESE member exchanges. As of today, all FESE members have either already fulfilled this commitment or are in the process of doing so shortly, including the Luxembourg Stock Exchange, which has extended its originally partial commitment to all end-users.

3. By Q4-2010: Supporting standardisation of trading flags and CESR recommendations

   In July, we committed to working on the mapping of trade identifiers in order to fully facilitate the easy consolidation of equity market data. Given the intricate link with the CESR Industry Working Group, which was created to propose concrete standards for a set of identifiers, we have decided to take the trade flag identifiers proposed by CESR for Regulated Markets (RMs) and Multilateral trading Facilities (MTFs) in October[4] as a pragmatic basis for this exercise.

   The internal mapping exercise has been launched involving the data experts from all FESE members. The exercise involves mapping all the existing flags to the flags proposed by CESR, taking into account the fact that exchanges offer other trade identifiers for the needs of different markets. All key results will be shared with the public in due course.

4. Continuing to provide innovative data solutions to the market through a competitive framework and cooperation with intermediaries

   In order to meet this continuous objective, we believe that a competitive framework is the right approach for Europe. Therefore, we will continue to promote a competitive regulatory approach in the MiFID Review.

“The data that exchanges currently provide is of a very good quality. When investors and traders use exchange data, they know they can fully rely on its accuracy. Moreover, exchanges’ data is fully available to all market participants, and in certain cases, it is available even for free. In addition, when the data is not for free, its cost is reasonable and in line with the economic value it creates,” says Judith Hardt, FESE’s Secretary General. “With our current actions, we are taking our contribution to the European Single Market one step further by improving the consolidatibility and availability of equity market data.”

Conclusion:

The provision of separate post‐trade data products by FESE members as well as the overall availability of 15-minutes delayed data free of charge will support data consolidation with regard to cost efficiency. However, given the small share occupied by exchanges in the overall cost of data (8% to 15%, with a downward trend), bringing overall costs down will require a collaborative effort on the part of everyone.

Similarly, FESE’s work on trade identifiers will further improve the consolidatibility of equity data. However, no matter what actions are taken by RMs (or MTFs) to improve the consolidatibility of their data, OTC data needs to improve in terms of not only availability and timeliness but also, most importantly, in terms of quality. A “bundling” by consolidation of good and poor quality market data would result in a data consolidation product that would have no practical value or use to anyone. In order to provide a meaningful consolidated view, it is of essence that clear and detailed reporting requirements for OTC data are introduced and supported on a pan-EU Level. This will reduce uncertainty amongst investment firms regarding their reporting duties, thus avoiding over- or under-reporting and improve the reliability of OTC post-trade data. Overall, the introduction of the Approved Publication Arrangements (APAs) regime will play an important role in the achievement of this objective. 

With regard to timeliness, reduced reporting times for OTC trades would help to align the information value between organised trading venues and OTC. Otherwise, non-reduced reporting time OTC data would be consolidated with real‐time data made available by organised trading venues (in milliseconds after the trade takes place) and would again result in a “bundling” of varying data qualities.

[1] The commitment applies to all FESE members in the EEA and Switzerland. In addition, the LSE Group, not a FESE member, has made a similar commitment (http://www.londonstockexchange.com/about-the-exchange/media-relations/pressreleases/ 2010/lseglaunchesposttrademarketdataservice.htm).

[2] Download study from http://www.atradia.com/

[3] In a few limited cases, the post‐trade product will be available by Q1 2011.

[4] See CESR Technical Advice at: http://www.cesr‐eu.org/index.php?page=document_details&from_title=Documents&id=7279