EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/17.III.4.2.2.3:17.III.4.2.2.3 Assessment of revenue-based or cost-based controls

EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/17.III.4.2.2.3

17.III.4.2.2.3 Assessment of revenue-based or cost-based controls

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The other options, being – (1) revenue-based; or (2) cost-based controls, were more interventionist in nature (top-down). ESMA observed that both options had specific pros and cons. Cost-based controls had the disadvantage of being highly complex, since cost-based controls would involve judgments, such as the determination of so called ‘joint costs’.1 Given the complexity of determining the joint costs, the cost-based option would create substantial efforts for both MiFID II Data Suppliers and NCAs to implement this model.2 On the other hand, cost-based controls would have the advantage of limiting prices to what would be charged in a competitive market. The option also permitted data suppliers to recover costs related to data production and dissemination.3 Compared to cost-based controls, revenue-based controls were seen as a simpler and cheaper option. However, revenue-based controls involved a discretionary choice. It would be difficult to find a ‘reasonable’ revenue limit. In other words, which percentage level of total revenues would still be considered as reasonable?4

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