12.IV.5 Level 3: CESR guidance

The most substantial top-down elements for publication and consolidation of pre- and post-trade data were apparent in informal CESR guidance (so-called Level 3 measures). The CESR guidelines and recommendations, although formally non-binding, provided substantial depth to the MiFID I-rules. CESR noted that ideally market forces would result in a consolidated view of trading activity, but that in practice private commercial interests might not always align with those of the market.1 An important incentive for CESR’s guidance was that, during the CESR-consultation, many market participants expressed their concerns with the arrival of MiFID I. One of the main concerns was that MiFID I could actually reduce transparency due to the removal of the ISD concentration-rule. According to this view, market forces alone would not deliver sufficient data consolidation, especially in relation to post-trade data.2 A related concern came from the main data suppliers under the ISD – RMs and data vendors – who considered pre- and post-trade data on websites (as the sole publication mechanism) as a major obstacle to consolidation (i.e. difficult to read).3 Concerns were also expressed about the potential risks of reduced data quality (i.e. new entrants would have little experience in this area) and the lack of common data standards, all posing a barrier to consolidation.4 CESR addressed all of these matters, albeit in a formally non-binding way, by means of the CESR guidelines and recommendations.5