EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/10.II:10.II Types of publication

EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/10.II

10.II Types of publication

Documentgegevens:

mr. J.E.C. Gulyás, datum 01-02-2021

Datum: 01-02-2021
Auteur: mr. J.E.C. Gulyás
JCDI: JCDI:ADS267151:1
Vakgebied(en): Financieel recht / Bank- en effectenrecht
Financieel recht / Europees financieel recht
Financiële dienstverlening / Financieel toezicht

The publication of equity pre- and post-trade data can be performed in two ways. The first way is where the platform where trading activity meets (resulting in equity pre- and post-trade data) publishes the equity pre- and post-trade data itself, such as through the RM publication infrastructure or the website of an SI.1 The second manner of publishing equity pre- and post-trade data is the situation where another party publishes the equity pre- and post-trade data,2 such as a data vendor3 or an RM or MTF.4 There can be various reasons to publish through another party. Examples include not having to deal with the publication yourself (i.e. minimal or no in-house infrastructure required),5 but also regulation that requires publication through a designated third party.6 The publication of equity pre- and post-trade data can also be a combination of publishing the data by the platform itself and through another party.7

The published equity pre- and post-trade data (whether published by the trading platform itself or another party, such as a data vendor) can be made accessible (so-called dissemination)8 to data users through various technical solutions. The technical solutions include options, such as a standard Internet connection9 or so-called co-location.10 The technical solution in question will depend on the needs of the data-user in question, including with respect to the magnitude of data to be delivered, latency (speed), and costs.11

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ESME (European Securities Markets Expert Group), Fact finding regarding the availability of post-trade data in equities in the EU, 19 March 2009, p. 4.

ESME, Fact finding regarding the availability of post-trade data in equities in the EU, 19 March 2009, p. 4.

Data vendors are parties that collect the equity pre- and post-trade data from the trading platform where the trading activity met (resulting in equity pre- and post-trade data) and subsequently repackage (redistribute) it to the public. Reference is made to L. Harris, Trading and Exchanges: Market Microstructure for Practitioners, Oxford University Press, 2003, p. 98-99). The wider public of data users consume market data via services provided by data vendors and not directly from ‘the source’, such as an RM (FIX Trading Community, MMT Technical Committee, Market Model Typology (MMT), Frequently Asked Questions, 29 November 2019, p. 9). The MiFID II regime excludes data vendors from the MiFID II scope (see chapter 13 and chapter 17).

Consider, for example, the situation where a SI publishes its quotes through the publication infrastructure of an RM or MTF. Another example is where an MTF uses the publication infrastructure of an RM to publish the MTF equity post-trade data. MiFID I and MiFID II acknowledge(d) the possibilities to publish data through third party infrastructures. Reference is made to art. 30(1) MiFID I and art. 3(3) MiFIR.

See, for example, AFME and KPMG, ‘MiFID II/MIFIR post-trade reporting requirements: Understanding bank and investor obligations’, September 2017, p. 22. An example of using another entities’ infrastructure is Tradeweb’s pre-trade SI service. Tradeweb provides an automated mechanism for SIs to meet the MiFID II pre-trade transparency requirements (available through: https://www.tradeweb.com/our-markets/data--reporting/trade-reporting-services-apa/).

A notable example is the introduction of so-called Approved Publication Arrangements (APAs) under MiFID II. MiFID II requires investment firms operating outside an RM or MTF to publish MiFID II equity post-trade data through an APA (art. 20(1) MiFIR). The rationale here is to ensure sufficient data quality and data consolidation (recital 116 MiFID II Directive). For an examination of APAs, reference is made to chapter 13.

For example, the London Stock Exchange Group (LSEG) notes it published 15 minute delayed data free of charge through a combination of (a) direct feeds, (b) through third party vendors and (c) the LSEG websites (LSEG, Response Form to the Consultation Paper: MiFID II/MiFIR review report on the development in prices for pre- and post-trade data and on the consolidated tape for equity instruments, 12 July 2019 (ESMA70-156-1471), p. 9).

The Commission gives the broad interpretation that ‘(d)issemination refers to giving out information’ (Commission, Glossary of useful terms linked to the markets in financial instruments, May 2015, under ‘dissemination’, p. 6).

A standard Internet connection enables, among other things, the use of so-called application programming interfaces (APIs). Simply put, an API enables a person to access the software of another person. In the context of dissemination, a data-user can use an API (through the Internet) to directly access the software of a data source. For example, Euronext enables clients to ‘pull’ pre- and post-trade data from the Euronext API (available through: https://www.euronext.com/nl/node/538).

10.

ESME, Fact finding regarding the availability of post-trade data in equities in the EU, 19 March 2009, p. 5. Co-location is the situation where electronic trading systems (computers) are in close physical proximity to a trading platform’s matching engine, so there is a speed advantage compared to other traders (see D. Busch, ‘MiFID II: regulating high frequency trading, other forms of algorithmic trading and direct electronic market access’, Law and Financial Markets Review, 2016, p. 78).

11.

ESME, Fact finding regarding the availability of post-trade data in equities in the EU, 19 March 2009, p. 5; and Securities Markets Stakeholder Group (SMSG), Advice to ESMA: Data Publication, 23 September 2014 (ESMA/2014/SMSG/042), p. 2-3.