14.IV Bottom-up versus top-down

Even if one is able to decide what a ‘reasonable’ price for equity pre- and post-trade data is, the next question is how to achieve such a result. A regulator can rely on market forces to ensure reasonable prices, such as competing data producers and data users negotiating the data price (bottom-up). A bottom-up approach can have the advantage of competition and innovation in the area of equity data products, such as more comprehensive or faster data.1 At the same time, multiple data suppliers do not by definition mean that the market for equity pre- and post-trade data is competitive. The argument here is that data products are not comparable, since they display different liquidity, and hence there is no real competition.2 In addition, a competitive market setting can result in fragmentation and hence require data users to license data from multiple data suppliers in order to have a trading overview. The result could be a higher overall price for equity pre- and post-trade data (licensed from multiple data suppliers). Regulation (top-down), or at least a combination of market forces and regulation (hybrid) might be required in order to overcome these barriers (here being non-comparability and fragmentation). The argument here is that a top-down or hybrid approach is necessary to ensure a reasonable price for equity pre- and post-trade data.3