Financial Regulatory Forum

Europe accord on consolidating share data urged

By Reuters Staff
January 20, 2010

LONDON, Jan 20 (Reuters) – Europe’s data companies, investors and brokers should reach an agreement on consolidating reporting of share prices to help unify fragmented markets, said news and data vendor Thomson Reuters.

“To be successful, the institutional buy-side, brokers and trade reporting services will need to reach agreement on standards, and these rules will need to be codified through MiFID 2 regulation,” Thomson Reuters said in its paper.

A European Union law known as MiFID was introduced in 2007 and sparked increased competition in share trading so that investors can trade the same stock on different platforms more cheaply.

But it also fragmented share price information and sparked calls for a “tape” that would gather share price data from all the rival platforms and exchanges to give investors an overall picture of the market, as in the United States.

Thomson Reuters, which competes with Bloomberg, Fidessa, ITG and others in selling share price data, said a more modular approach is needed to data pricing, underpinned by regulatory action.

“This is a step forward,” said Steve Grob, director of group strategy at Fidessa.

“What we need is a grown-up, joined-up approach that takes these industry issues and, perhaps, tries to divorce them from any commercial issues and sets out to solve them,” he added.

MiFID is being reviewed this year, and price fragmentation is on the regulatory agenda.

BUY-SIDE NOT HAPPY

Thomson Reuters said it asked over 20 buy-side firms how to improve the way share prices are presented so that investors can be sure they are trading at the best price available in the market.

“The buy-side considers the cumulative cost of fees charged by exchange and trade reporting services is a significant barrier to adoption of a consolidated tape and a detriment to overall transparency,” the study said.

Consolidated data can include the best bid and offer for a stock across competing trading venues, and the history of a completed trade such as price, volume, time and venue.

The Thomson Reuters study makes 14 proposals, some of which it has already introduced.

“I am sure there will be some devil in the details, but we would much rather collaborate in this instance than let the regulators do it for us,” Fidessa’s Grob said.

Many of the proposals can be implemented by the data vendors among themselves, Grob said. “If we can get agreement amongst us (around three or four major data vendors), it goes a long way toward winning the battle.”

For effective consolidation of prices across the market, common standards need to be codified through a revised MiFID, ThomsonReuters said.

Data vendors already supply consolidated information to the market but take-up has not been broad.

“We would welcome some sort of agreement on common standards that would improve the situation with data in Europe,” said Belinda Keheyan, head of market and corporate communications for ITG in Europe.

Regulatory intervention through the reform of MiFID would ensure execution and trade publication venues provide data at a much lower price, the Thomson Reuters study said. (Reporting by Huw Jones and Jane Baird, editing by Andrew Callus) ((Reuters messaging: huw.jones.reuters.com@reuters.net; + 44 207 542 3326; huw.jones@thomsonreuters.com))

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