15.IV Background

There are several reasons why the ISD did not cover rules for equity pre- and post-trade data prices. First of all, through the ISD regime, the EU aimed to introduce a minimum harmonized regime for RMs and investment firms. This follows from the aim of the Commission in drafting the ISD,1 as well as the final ISD-recitals (‘only the essential harmonization necessary’).2

Second, during the initial drafting phase of the ISD it was not the aim to regulate market structure-matters, such as transparency-rules, let alone data pricing-rules. The Commission’s proposal of the ISD covered no rules on equity pre- and post-trade transparency or concentration.3 The situation changed during the subsequent negotiations on the ISD, but the themes remained relatively broad in nature. Emphasis of the Member States favouring EU market structure-rules to be introduced under the ISD emphasized transparency and concentration-rules (and access rules to RMs), not data prices.4

Third, once the contours of the final ISD framework became visible, it was clear that Member States could: (i) implement the optional ISD concentration rule, (ii) use national law in routing trades to RMs, and/or (iii) require RMs to function as the publication arrangement for trades taking place outside RMs. In other words, the ISD would permit concentration of trading and related concentration of equity pre- and post-trade data on one or a few RMs. The result would be less demand for equity pre- and post-trade data. The reason here is that, in contrast to trading being fragmented, concentrated trading on one or a few RMs, would not require data to be bought from a wide range of venues in order to have a consolidated view of trading.5

Fourth, and finally, the lack of harmonised data pricing-rules fitted with the broader trend of pricing-regulation worldwide. During the drafting of the ISD it was common regulatory practice to hold back when it came to data pricing-regulation. The ‘most explicit formulation’ a jurisdiction had in place was Belgium,6 which required exchanges (under the ISD relabeled as a ‘RM’) to publish equity pre- and post-trade data at ‘cost price and without any form of discrimination’.7 Belgian law did not specify precisely what prices could be charged.8 If one takes a more global perspective, similar reluctance towards specific data price regulation was apparent in the U.S. Even in the U.S, a system that could be considered more top-down with respect to pre- and post-trade transparency compared to the EU,9 the Securities and Exchange Commission (SEC) attempted to avoid becoming a rate-making body (save for some exceptions).10 Simply put, it was not common regulatory practice during the ISD timeframe to intervene fiercely in the area of data prices through equity pre- and post-trade transparency regulation. An explanation for this approach is that it is questionable whether equity pre- and post-trade data prices should be a concern of (EU) equity pre- and post-trade transparency regulation. Many matters related to equity pre- and post-trade data prices are highly related to other fields of (EU) law, such as competition law (e.g. price discrimination) and intellectual property (ownership of equity pre- and post-trade data).