17.III.4.2.2.4 Final ESMA view: preference for general principles and disclosure obligations

Based on the responses to the ESMA Consultation, ESMA did not recommend a revenue-cap (option c.ii). This option was considered as unpracticable and ineffective. Neither did ESMA recommend the option of limiting data charges by reference to costs (option c.iii). ESMA noted that the latter option contained interesting ideas, but was not workable as it would impose too burdensome a cost on the MiFID II Data Suppliers and others, including their supervisors, and would present significant challenges to implement.1 What remained was option b, being general principles and disclosure obligations. However, ESMA acknowledged that option b had its own shortcomings (e.g. it could be too vague: see paragraph 4.2.2.2 above) and therefore sought to develop an enhanced option.

The enhanced option of ESMA consisted out of disclosure obligations, combined with a mandate to make the level of prices charged for data based on the production and dissemination costs. ESMA also wanted any increases in prices to reflect changes in costs attributable to data sales, and that differentials in prices charged to different customer categories would be based on the scope and scale of data, as well as the use of the data. Although the ‘enhanced option’ might at first glance sight seem similar to ESMA’s initial option to provide cost-based controls, there is one main difference. Under the ‘enhanced option’ (transparency plus approach), ESMA downplayed its initial proposal for cost-based controls. With the new proposal ESMA did not specify in exact terms how costs needed to be apportioned and calculated. Therewith, flexibility would be left to the MiFID II Data Suppliers.

ESMA proposed that the disclosure obligations needed to include, among other things, the costs for producing and disseminating data; the apportionment of joint costs; and a brief explanation of the method used to calculate those figures.2 In ESMA’s view this type of disclosure could keep the price levels of market data in check. Although commercially sensitive information, ESMA proposed to disclose this information to the general public, including not only NCAs, but also to market participants. In effect, ESMA suggested light-touch regulation for price levels, which could be corrected through disclosure to NCAs, as well as market participants.3