The Markets in Financial Instruments Directive (MiFID) is a cornerstone of EU financial services legislation and is of direct relevance to asset management companies. In 2014, the European Commission adopted new rules revising MiFID, consisting of a Directive (MiFID II) and a regulation (MiFIR). Overall, MiFID II yielded positive results in terms of liquidity and transparency for investors.
Among possible improvements to the MiFID framework, EFAMA encourages the creation of a well-structured, reasonably priced consolidated tape managed by ESMA and fed by all trading venues and systematic internalisers for all financial instruments. A second, long-term EFAMA objective is better enforcement of data providers’ existing obligation to provide market data on a “reasonable commercial basis”.
The FCA’s recent report on the wholesale data market is an important and high-quality study which echoes many long-standing buy-side concerns. It finds evidence of unequal market power in terms of market concentration, highly profitable margins, opaque pricing practices, excessive charging, bundling practices and complex licensing agreements, all of which negatively impact data users. Much of this data is indispensable for users to stay in business and fulfil regulatory obligations.
EU asset managers, banks and brokers are today urging policy makers not to concede to pressure which will lead to suboptimal outcomes in the review of the Markets in Financial Instruments Directive (MiFID/R).
In a letter to policymakers, 18 European buy-side firms state that only an Equities/ETFs tape that delivers data in real-time and that includes pre-trade data in the form of 5 layers of best bid and offer, will meet with the necessary market demand to make the Equities/ETFs Consolidated Tape commercially viable. A reasonably priced tape is also a precondition for success, they argue.
The FCA’s recent report on the wholesale data market is an important and high-quality study which echoes many long-standing buy-side concerns. It finds evidence of unequal market power in terms of market concentration, highly profitable margins, opaque pricing practices, excessive charging, bundling practices and complex licensing agreements, all of which negatively impact data users. Much of this data is indispensable for users to stay in business and fulfil regulatory obligations.
Today’s European Parliament vote concludes the MiFID/R review process
EU asset managers, banks and brokers are today urging policy makers not to concede to pressure which will lead to suboptimal outcomes in the review of the Markets in Financial Instruments Directive (MiFID/R).
A real-time consolidated tape, provided it is made available at a reasonable cost, will bring many benefits to European capital markets. A complete and consistent view of market-wide prices and trading volumes is necessary for any market, though this is especially true for the EU where trading is fragmented across a large number of trading venues. A real-time consolidated tape should cover equities and bonds, delivering data in ‘as close to real-time as technically possible’ after receipt of the data from the different trade venues.
The current lack of quality pre- and post-trade data and the fragmentation of data sources remain an obstacle to the completion of the Capital Markets Union. The benefits of a real-time Consolidated Tape are wide-ranging: from market surveillance for supervisors, to best execution and an improved view on trading opportunities for retail investors, to portfolio management and pre- and post-trade analysis for fund managers to name a few.
Funds face unique challenges in performing intermediary oversight, and especially so because of MiFID II requirements, changing regulatory landscapes, and the absence of an industry agreed-upon standard between funds and their distribution channels. To help address these challenges, a dedicated working group developed a uniform due diligence questionnaire (DDQ) that will serve as the standard for investment funds (UCITS and AIFs) in performing onboarding and ongoing oversight of distribution channels.
