Government intervention said unlikely in EU share-data fragmentation
By Huw Jones
LONDON, Sept 8 (Reuters) – Fragmentation of share trading data makes it harder for European investors to spot the best prices but there is no appetite so far for public intervention, industry officials said on Tuesday.
The European Union’s Markets in Financial Instruments Directive (MiFID) was introduced in November 2007 to give investors more choice by cutting barriers to cross-border share trading in the 27-nation European Union.
It spawned many new trading venues such as Chi-X, Turquoise and BATS Europe that have taken volume from exchanges.
“This is a serious issue that needs addressing,” Tony Whalley, head of derivatives dealing at Scottish Widows Investment Partnership, told a Reuters roundtable.
When faced with a similar situation, U.S. regulators forced platforms to feed prices through a single pipe or consolidated tape for all market users to see.
This is not on the cards for now in Europe where a patchwork of market-led attempts from Markit BOAT, Bloomberg, ThomsonReuters and others to collect data has emerged, none proving to be the magic bullet, regulators and users said.
“The question that is still outstanding is whether the existing MiFID framework is good enough to deliver a satisfactory solution,” said Martine Doyon, manager of secondary markets policy at Britain’s Financial Services Authority.
“I have not had a clear answer to that today,” Doyon said.
When the EU’s executive European Commission reviews MiFID in 2010, price fragmentation will likely feature, she said.
Market users want exchanges to be more flexible in how they offer and charge for data on transactions, saying this would help devise price feeds more competitively.
The sale of price data is a key revenue for exchanges but the Committee of European Securities Regulators (CESR), grouping supervisors from EU states, has said all trading venues should supply data on a “reasonable commercial basis”.
Regulators should “muscle” more to enforce the CESR principle, said Niki Beattie, chief executive of the Market Structure Practice.
However, Eija Holttinen, CESR’s director of markets and intermediaries, said many national regulators felt uncomfortable and lacked the power to do so.
Users like Scottish Widows could ask competition authorities to force bourses to unbundle data, said Charlotte Crosswell, president of Nasdaq OMX Europe <NDAQ.O>. “Exchanges are not going to come willingly to the table,” she added.
BATS Europe Chief Executive, Mark Hemsley, urged the sector to agree parameters for two or three different types of price feeds, all on a non-proprietary “open source” basis.
“If you look at the consolidated tape agreement in the United States, it’s a nightmare. We are much better off taking the concept but using market forces to get it established,” Hemsley said.
Chi-X chief operating officer, Hirander Misra, also dismissed the need for a mandatory consolidated tape but said regulators could help forge and police high-level standards to ensure consistency in feed offerings across the sector.
Competition is still helping to cut data costs for users.
Will Meldrum, managing director of Markit BOAT, said the company would cut its fees from 120 euros ($172.7) a month to 40 from January 2010.