EFAMA has released a joint statement together with AFME (Association for Financial Markets in Europe), EFSA and the Nordic Securities Association on significant issues with the supervision of market data costs.
Under the latest MiFID/MiFIR rules, market data must be priced on the actual cost of production and dissemination with a reasonable margin, bearing in mind that market data is a by-product of the trading activity. Furthermore, no value-based pricing is allowed.
However, ESMA’s current proposals could jeopardise this goal for various reasons:
- The proposals take a joint cost perspective.
- Price categorisations allow value-based pricing to continue.
- The cost calculation allows data providers to charge beyond the cost of production and dissemination, and include undefined additional costs.
- The standardised definitions or harmonised template for market data policies are inadequate.
- The proposals for increased transparency are limited.
Market data is indispensable for trading, clearing, settlement, research, investment strategy, trade control, best execution, reporting, accounting, risk management etc. Unless corrected, this situation would allow market data costs to continue increasing significantly, raising the cost of trading in the EU, to the detriment of end-investors and the success of the Capital Markets Union.
How to fix the situation:
- Detail exactly which costs can be included by data providers, clearly incorporating the by-product approach.
- Define margins as operating profit.
- Standardise the requirements of the per user approach.
- Prepare an exhaustive list of definitions and a template on the allowed market data policies.
- Require more detailed transparency on pricelists, costs, margins and revenue.
- Ensure that these rules are consistently monitored and enforced by the NCAs
