16.III.4 Background

The guidance of CESR stems from market participants asking CESR to clarify the meaning of a reasonable commercial basis in relation to bundled services.1 Initially, CESR believed that the aim of the reasonable commercial basis-principle could not be obtained where data would be conditional on other services/data.2 Not everyone agreed with CESR’s initial finding. Illustrative was the response of one large data vendor (i.e. Bloomberg). Bloomberg considered CESR’s statement against conditioning equity pre- and post-trade data on the purchase of other bundled services and/or data as a ‘constructive first step’.3 However, in view of Bloomberg, additional CESR guidance would be necessary to ‘address the potential abuse and market distortions in the pricing of market data by sole-source providers of data’. Bloomberg believed that any effort of MiFID I to inject greater competition into the EU markets for the provision of market data would be frustrated by the concentration of market power being proposed through exchange mergers, as well as the alleged monopoly the individual exchanges had over their market data.4 Bloomberg argued that the MiFID I best execution-duties would naturally force investment firms to buy data.5 Bloomberg believed that investment firms would have to buy data even at what they may justly consider to be unfairly high prices (so-called price inelasticity). It was the view of Bloomberg that this suggested the need for special control on monopoly prices the RMs and MTFs could charge, as well as so-called collusive behavior among RMs and MTFs in establishing uniform prices, terms of service, and so forth. In sum, Bloomberg believed merely a recommendation to unbundle data was insufficient.6

Several data suppliers, in particular RMs, upheld a different view.7 There was general consensus on CESR’s unbundling-standard, but several RMs argued it needed to be clear that ‘data could be grouped and sold together’. These respondents worried that otherwise a publication venue could be required to sell the trading information of only one entity (i.e. ‘cherry-pick’ data), comprising that entity’s anonymity.8 In the end, CESR’s final recommendation reflected the view of the RMs (not: Bloomberg). CESR still permitted publication venues to make the commercial choice as to the various combinations of data they would like to offer to their clients.9