16.II.4 Background

The Commission noted during the ISD-review that it did not advocate any top-down or regulatory-led intervention in respect of data consolidation.1 Instead, the Commission preferred market forces to provide the effective integration of equity data (i.e. a bottom-up approach). However, uneasy with the complete reliance on market forces, the Commission questioned whether further consideration needed to be given to a more active role for public authorities. The Commission gave as an example the designation of nationally mandated pre- and post-trade data consolidators to whom publication venues (i.e. venues required to publish data) needed to make information ‘available on a reasonable commercial basis’.2

The Commission’s MiFID I-proposal reflected the abovementioned hesitations to rely completely on market-driven consolidation. Although the Commission proposed a bottom-up regime for data consolidation, it also suggested top-down elements, such as to make MiFID I pre- and post-trade data available at zero (free of charge), as well as at reasonable prices. The Commission proposed SI quotes to be made easily accessible to other market participants ‘free of charge’.3 In addition, the Commission suggested MiFID I post-trade data published by investment firms, as well as MiFID I pre- and post-trade data published by RMs and MTFs, to be made available ‘on a reasonable commercial basis’.4 The aim of the Commission was to make pre- and post-trade data easily available, intending to support price formation, reduced search costs for investors, and the facilitation and monitoring of best execution-obligations in the fragmented trading landscape expected under MiFID I.5

The European Parliament took a less interventionist perspective. The European Parliament amended the Commission’s position from (a) making SI quotes available free of charge to (b) available ‘on reasonable commercial terms’.6 Similar to the Commission’s proposal, the European Parliament preferred RMs and MTFs, as well as investment firms, to make MiFID I pre- and post-trade data, respectively post-trade data, available on a reasonable commercial basis.7 The European Parliament’s amendments made the MiFID I-framework more competitive with respect to the market for pre- and post-trade data, that is - SIs could now gain a profit from selling data related to their quotes. In addition, the European Parliament levelled the playing field between SIs and RMs/MTFs, since both would become subject to the same data pricing-rules concerning pre-trade data.

The Council adopted the European Parliament’s position.8 The only change was that the Council altered the wording of ‘reasonable commercial terms’ for SI quotes to ‘reasonable commercial basis’. Therewith, the Council made the terminology of data pricing-rules similar for RMs, MTFs, investment firms, including SIs. The alignment in terminology suggests that there is no difference in meaning between the two terms, that is - the terms ‘reasonable commercial basis’ and ‘reasonable commercial terms’ appeared to be interchangeable. The same conclusion can be drawn from CESR’s guidance for MiFID I, making no distinction between both terms.9

It should be noted that neither the Commission, nor the European Parliament/Council, made recommendations to specify the meaning of a reasonable commercial basis. Accordingly, the MiFID I-approach would be principle-based in nature. RMs, MTFs, and investment firms (including SIs) could compete on prices for market data, albeit within the broad boundaries of a ‘reasonable commercial basis’. No regulatory intervention was planned that would specify the actual prices or methodologies for pricing market data under MiFID I. Neither did the Commission, European Parliament and Council make references to ‘non-discrimination’ provisions in the context of MiFID I equity pre- and post-trade data prices. The requirement to make MiFID I equity pre- and post-trade data available on a ‘non-discriminatory basis’ stems from CESR’s advice for the Level 2 measures of MiFID I. CESR advised to make the MiFID I equity pre- and post-trade data available on a ‘non-discriminatory basis’.10

The foregoing position was reflected in the final MiFID I-text. The final MiFID I-text relied on: (a) competition among publication venues in terms of data pricing; and (b) the broad principle of a reasonable commercial basis to provide ‘fair’ prices for data under MiFID I. Instead of providing a specific definition of a ‘reasonable commercial basis’, the EU relied on competitive forces to provide ‘reasonable’ fees for market data. The EU showed a preference for a bottom-up approach (competitive forces for data pricing, as supplemented by a broad reasonable commercial basis-standard). In reflecting the broader MiFID I aim to ensure ‘reasonable’ prices, regardless of the publication arrangement in question, the Commission extended the MiFID I Directive requirement for ‘reasonable’ data prices to all publication arrangements of MiFID I equity pre- and post-trade data, including third parties (data vendors), as apparent in the MiFID I Implementing Regulation. The MiFID I Implementing Regulation also required all publication arrangements to make the MiFID I equity pre- and post-trade data available on a ‘non-discriminatory basis’. The latter echoed CESR’s advice in drafting MiFID I.