The European Securities and Markets Authority (ESMA) has published its final report on MIFID II and MIFIR obligations relating to market data.
This lays down guidelines to help data providers meet their responsibilities, under MiFID II and MiFIR, to publish market data “on a reasonable commercial basis” and to provide access to market data free of cost 15 minutes after publication.
This final report builds on a consultation process that ESMA, the EU securities market regulator, ran from 6 November 2020 until 11 January 2021.
During this consultation, ESMA sought industry feedback on a number of draft guidelines detailed in its consultation paper and then solicited additional input through one-to-one consultations with key stakeholders, as well as advice from the Securities and Markets Stakeholders Group (SMSG).
These guidelines apply to national regulators and trading venues, as well as consolidated tape providers, systematic internalisers and approved publication arrangements (APA).
The Markets in Financial Instruments Directive II (MiFID II) and Markets in Financial Instruments Regulation (MIFIR) require that market data is made available to market participants in an “easily accessible, fair and non-discriminatory manner”, while also encouraging steps to make market data available to a wider range of market participants and at lower average cost.
Many respondents to ESMA’s consultation paper highlighted the current complexity of market data policies, resulting in high administrative costs for users — particularly in understanding, and comparing between, market data fees of different market data providers.
Responding to this concern, ESMA adds new guidance setting out general principles for delivering market data in a “clear and accessible manner”. Guideline 1 requires market data providers to publish their market data policy, and all associated documents, in “an accessible and user-friendly way” on their website.
More broadly, these regulations demand that fees charged for market data should be based on the costs of producing and disseminating this data (although this may include the addition of a “reasonable margin”). ESMA suggested in its consultation paper that the cost methodology should identify clearly how costs are incurred when producing and disseminating market data, along with a breakdown of direct costs, joint costs and other cost elements.
A number of respondents said during the consultation process that cost methodology should not be made public since this could expose commercially-sensitive information to competitors. However, these respondents did agree to share their cost methodology with the regulatory authorities.
The guidelines also specify that market data providers must offer market data on a standalone basis without being bundled with other services. In ESMA’s opinion, this unbundling of data delivery enables customers to “choose products according to their needs, without being obliged to pay for additional services which they do not make use of”.
Respondents to the consultation paper largely agreed on the general need for unbundling of market data from other services. However, some warned that requirements to disaggregate data can be problematic, indicating that the “demand for disaggregated data is low” and the chain of data flow, including data vendors, “is not set up for disaggregation”.
Under Article 13(1) of MiFIR, trading venues are required to make data available free of charge 15 minutes after publication (‘delayed data’). The same obligation applies to consolidated tape providers and APAs under MiFID II.
In its consultation paper, ESMA acknowledged that there may be certain situations where it is appropriate for data providers to be paid for their provision of ‘delayed data’, specifically in cases of data redistribution or “value-added services”. However, it specifies that charges should only be applied by the data provider when the data user “generates a direct economic benefit via the selling of that data”.
The application date for these guidelines has been set for 1 January 2022.
