The European Securities and Markets Authority (ESMA), the European Union financial regulatory agency and European Supervisory Authority located in Paris, wants one ticker tape for some 20 trading platforms in Europe.
The ESMA came out this week to state that stock exchanges should be forced to contribute prices to a pan-European feed for trades. This it said, would make the comparison of prices on different platforms easier for investors.
All together, the Federation of European Securities Exchanges (FESE) and other market segments, encompassing stock exchanges, financial derivatives, energy and commodity exchanges has 19 full members, but the FESE represents close to 36 exchanges from 30 different countries within the EU, Iceland, Norway and Switzerland.
“Transparency is important to ensure that markets are fair, sound and efficient. However, after nearly two years of operating under MIFID II, we are still lacking a reliable view of liquidity across the EU.”ESMA Chair, Steven Maijoor
The ESMA published its first review report of prices for market data and on the consolidated tape for equity this week.
The review follows the application of the Markets in Financial Instruments Directive (MiFID II) two years ago.
The ESMA review found that, to date, MiFID II has not delivered on its objective to reduce the cost of market data charged by trading venues and Approved Publication Arrangements (APAs).
Moreover, it said, no consolidated tape has materialised ESMA is recommending the establishment of a European Union (EU) wide real-time consolidated tape for equity instruments.
Steven Maijoor, ESMA Chair, said: “Transparency is important to ensure that markets are fair, sound and efficient. However, after nearly two years of operating under MIFID II, we are still lacking a reliable view of liquidity across the EU. Therefore, we need to establish a real-time consolidated tape for equity instruments to remedy the fragmentation of EU markets, create a real single market and so contribute to the establishment of the Capital Markets Union.
“…a mix of legislative changes and supervisory guidance to improve transparency and to ensure that market data is provided on a reasonable commercial basis.”– ESMA
“Access to market data is becoming increasingly important for securities markets and it is important that data users know what they are paying for. ESMA will therefore provide further guidance on the cost of market data.”
For ESMA, the main reasons why a market-led equity consolidated tape failed to develop are the limited commercial rewards to potential providers within the current regulatory framework, as well as possible competition by non-regulated entities such as data vendors.
It is therefore recommending the mandatory contribution of data by trading venues and APAs to the consolidated tape.
It noted that feedback received from stakeholders presented conflicting views with most trading venues stressing that data prices have been overall stable, while data users and vendors complained about excessive fees, complex market data policies and overall higher costs for market data.
ESMA said that due to the mixed achievements of the market data provisions, it is proposing “a mix of legislative changes and supervisory guidance to improve transparency and to ensure that market data is provided on a reasonable commercial basis.”
Analysts note that the EU regulator is aiming for consolidated market information in the same style as that offered in the United States’s equities markets.