EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/18.II.2:18.II.2 Option two: a broad definition

EU Equity pre- and post-trade transparency regulation (LBF vol. 21) 2021/18.II.2

18.II.2 Option two: a broad definition

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

A broad definition can solve the problems associated with a narrow definition of EU equity pre- and post-trade transparency regulation. A broad definition does not merely consider the term ‘transparency’ to be equity pre- and post-trade data published within a certain timeframe (narrow definition), but also includes high quality publication and consolidation, as well as ‘reasonable’ equity pre- and post-trade data prices. In other words, a broad definition of EU equity pre- and post-trade transparency regulation considers ‘publication’, ‘consolidation’, and ‘equity pre- and post-trade data prices’ all to be a species of the genus ‘pre- and post-trade transparency’.

A main advantage of a broad definition is that it suits better with the current EU situation. EU equity markets have become fragmented ever since MiFID I. The fragmented EU equity markets, combined with technological innovation (algorithmic trading requiring more data), resulted in a higher demand for equity pre- and post-trade data. The result is that publication, consolidation, and data prices have become a key priority for the EU, in particular under MiFID II. The term ‘transparency’ is nowadays often used as a general concept of which publication, consolidation, and data prices are sub-elements, rather than related, but distinct, concepts. The foregoing is illustrated by a recent statement of ESMA:

“Transparency is important to ensure that markets are fair, sound and efficient. However, after nearly two years of operating under MIFID II, we are still lacking a reliable view of liquidity across the EU. Therefore, we need to establish a real-time consolidated tape for equity instruments to remedy the fragmentation of EU markets, create a real single market and so contribute to the establishment of the Capital Markets Union. Access to market data is becoming increasingly important for securities markets and it is important that data users know what they are paying for (…).”1

The ESMA statement shows that transparency also includes a reliable view of liquidity across the EU, of which the establishment of a consolidated tape is of great importance. The ESMA statement also makes clear that access to equity pre- and post-trade data (i.e. ‘reasonable’ data prices) has become a key factor in ensuring published equity pre- and post-trade data is available in practice. Phrased differently, a broad definition of EU equity pre- and post-trade transparency regulation, including EU measures for publication, consolidation and data prices, suits well with the general MiFID II objective of enhancing transparency.

The foregoing does not mean that a broad definition of EU equity pre- and post-trade transparency regulation is perfect. There are disadvantages of a broad definition. A main disadvantage is the unlimited scope. Where does EU equity pre- and post-trade transparency regulation stop? Does the broad definition also mean that, besides publication, consolidation, and data prices, EU equity pre- and post-trade transparency regulation includes areas that traditionally have been part of competition law (e.g. enforcement of ‘reasonable’ prices) or intellectual property law (e.g. ownership of data)? The answer to these questions is unclear. In sum, although a broad definition of EU equity pre- and post-trade transparency regulation corresponds better to the current EU situation, it also results in a complex notion of what ‘EU equity pre- and post-trade transparency regulation’ is.

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