EFAMA supports the initiatives launched by IOSCO and other regulators (e.g. ESMA, FCA, SEC) to analyse and address the significant issues concerning market data in the secondary equity market.
From the investment managers’ perspective, the scope of the Consultation Report is too restrictive, as it does not fully consider the issues related to data provided by data vendors (e.g. Bloomberg, ICE, Refinitiv, etc.). In practice, market participants are confronted with significant issues in their relations with data vendors, due to the ongoing inflation and lack of transparency on fees, limitations of liability in case of wrong data, difficulties in making internal use of market data provided by market participants; etc.
Market participants face challenges concerning the excessively high market data fees and unfair licensing provisions from some market data providers. The prices and consistently above-inflation fee increases are difficult to justify as they do not reflect the true cost of supplying these data.
In order to provide data on a reasonable commercial basis, market data fees should have some relation to the cost of production of the data. The existence of monopolies at the data source level is not an issue per se, but the abuse of a dominant position by those monopolies is a problem. The existence of monopolies combined with the mandatory use of market data to satisfy regulatory requirements (Best Execution, rating and regulatory reporting) mean that market participants virtually have no leverage in negotiating fees and other contractual terms with regulated trading venues.
EFAMA supports the use of Consolidated Tape on a voluntary basis, to the extent that it is properly constructed and governed. As a matter of fact, an ill-designed Consolidate Tape could actually worsen the market data problems considerably. If the Consolidated Tape Providers’ (CTP) governance and operations requirements are not calibrated adequately, data users would use inadequate CTP data and therefore may be forced to continue to use the other market data sources as well. Consolidated Tape is not a solution to the fundamental issues with the cost of market data. This issue must be addressed regardless of whether a Consolidated Tape exists or not.
For these reasons, we would suggest IOSCO to develop guidance with respect to market data licensing practices and terminology used by exchanges for basic market data products. More specifically, IOSCO should recognise that exchanges hold disproportionate market power on market data generated from orders and trades conducted on their venues.
