EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/2.III.2:2.III.2 Speed

EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/2.III.2

2.III.2 Speed

Documentgegevens:

mr. J.E.C. Gulyás, datum 01-02-2021

Datum: 01-02-2021
Auteur: mr. J.E.C. Gulyás
JCDI: JCDI:ADS266903:1
Vakgebied(en): Financieel recht / Bank- en effectenrecht
Financieel recht / Europees financieel recht
Financiële dienstverlening / Financieel toezicht

Speed is also a key variable of pre-trade data. Speed, also referred to as the latency, can be divided in (i) delayed, (ii) real-time, or (iii) low-latency.1Delayed pre-trade information is made available at a higher latency (slower) than real-time, for example after 10 or 15 minutes. Data-users who subscribe to real-time services can receive pre-trade data as it is generated (usually at an additional fee).2 Real-time services are made available through a standard data feed.3 Low-latency refers to more speedily data compared to real-time (lower latency). Low-latency is enabled through a special data feed intended to minimize network and other types of latencies (e.g. so-called co-location, proximity hosting, or direct electronic access).4 The speed of pre-trade data publication has increased over the past decades due to a combination of technological development and stricter regulation.5

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See Oxera, Pricing of market data services: An economic analysis, February 2014, p. 43.

L. Harris, Trading & Exchanges: Market Microstructure for Practitioners, Oxford University Press, 2003, p. 98.

ESMA, Final Report: Technical Advice to the Commission on MiFID II and MiFIR, 19 December 2014(ESMA/2014/1569), p. 296. The data feed (technical infrastructure to receive market data) can be direct (i.e. straight from the source, for example an RM) or indirect (i.e. through a data vendor). For a further examination of data feeds, reference is made to chapter 10.

Co-location is where market participants place their computer systems in direct proximity to a venue’s computer that matches orders. Proximity hosting is the provision by third parties of computer systems directly proximate to a trading venue’s matching engine. High-speed direct electronic access means connections that allow the transmission of messages within fractions of a second, including messages to initiate, change or cancel orders (BaFin, Frequently asked questions (FAQs) relating to algorithmic trading and high-frequency trading (Update: 17 July 2019, p. 6). For an examination of the MiFID II framework on co-location, proximity hosting, or high-speed direct electronic access, reference is made to D. Busch, ‘MiFID II: regulating high frequency trading, other forms of algorithmic trading and direct electronic access’, Law and Financial Markets Review, 10:2, 72-82, DOI: 10.1090/17521440.2016.1200333.

See, for example, E. Banks, Dark Pools: Off-Exchange Liquidity in an Era of High Frequency, Program, and Algorithmic Trading, Springer, Second Edition, 2014, p. 153-173. The changes in EU regulatory requirements in terms of speed for equity – where applicable – are examined in chapters 3-5.