18.IV.2.2.3 Interim conclusion

The MiFID I-rules, as supplemented by CESR’s soft law, can be characterized as a hybrid EU strategy. The EU initially relied mainly on market forces (bottom-up) in the MiFID I text, although some rules were in place to ensure timely, standardized, and quality published data. The EU – in the form of CESR – supplemented the MiFID I text through soft-law that was more top-down in character. The CESR guidance emphasized preconditions for adequate consolidation (e.g. high quality and standardized data), but provided no guidance on the consolidation mechanisms themselves (e.g. establishment of a consolidated tape or quote).1 The focus of the MiFID I text and CESR guidance was on the publication of post-trade data, including the preconditions for adequate post-trade data consolidation.

Experience with MiFID I shows that competition among trading platforms brought benefits in terms of investor choice, reduced explicit trading costs, and innovation. However, the MiFID I experience also illustrates that such competition, combined with a bottom-up approach for publication and consolidation services, can result in data fragmentation. Although expected by the EU, as evidenced in the strict pre- and post-trade transparency rules, MiFID I was in hindsight too careless when it came to the regulation of data publication and consolidation services. The MiFID I-rules, including the substantial amount of CESR guidelines and recommendations, proved to be unfit to ensure a reliable overview of trading activity. Market forces provided publication and consolidation services, but these were not of a quality that satisfied the market, especially not in the area of post-trade transparency.2 CESR proposed further harmonisation under MiFID II in the form of common post-trade data standards and clarifications in terms of the applicability of the rules, as drafted by a joint CESR/industry group.3 Market participants overall supported the view of CESR. The EU reflects a similar opinion under MiFID II, which follow CESR’s recommendations. As shown in chapter 13, MiFID II uses a more top-down approach through harmonized publication and consolidation entities. The MiFID II focus is on post-trade data.