18.IV.2.3.4 MiFID II Review: equity pre-trade data

In the area of pre-trade transparency, there are fewer issues. Although MiFID II relies strongly on market forces to obtain a consolidated view of pre-trade information (CTPs can, but are not obliged to, consolidate pre-trade information), at present a so-called European Best Bid and Offer (EBBO) is closer than a consolidated tape of post-trade information. The reason is that market participants, such as data vendors, execution algorithms of investment firms, and operators of periodic auctions, calculate the EBBO by themselves. However, there is no official EBBO, meaning that some market participants might not have access to a consolidated view of pre-trade information.1 The unequal access to compared pre-trade information might in the future result in further EU intervention (i.e. more top-down). Part of the MiFID II Review Clause is the examination of setting up a consolidated quote system.2 The Commission observes in the Commission’s MiFID II Consultation that there appears to be consensus that, despite the challenges concerning the magnitude of equity pre-trade data involved, a consolidated quote system is technically possible.3 Accordingly, it is a political – rather than a technical – decision whether regulatory intervention is necessary (top-down) to establish a consolidated quote. Only time will tell what the final EU strategy will be.