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BØRSMÆGLERFORENINGEN. Information Post MiFID – How far are we? Niki Beattie Managing Director, The Market Structure Practice. AGENDA. Start at the beginning – how did we get here? The impact of MiFID on pre and post trade information

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Information Post MiFID – How far are we?

Niki Beattie

Managing Director, The Market Structure Practice



Start at the beginning – how did we get here?

The impact of MiFID on pre and post trade information

The cost of market fragmentation

What do we mean by a consolidated tape?

Do we need one or can we manage without?

What are the barriers to consolidating data without regulation?

Is regulation likely and if not what happens?

The impact of further data consolidation on the market

Start at the beginning

Start at the beginning


Trading on domestic Exchange mandatory in some European countries and domestic Exchange owned and transmitted 100% of the data set

Off Exchange Trading allowed in some countries but differing rules

e.g. UK – mandatory reporting to the Exchange

Exchange owned 100% of the on and off exchange data set and sold it to consumers

e.g. Germany – no mandatory reporting of trades

Approximately 50% of trades by value went unreported to the market

Post MiFID

On Exchange trading monopoly broken by introduction of competition

Off Exchange trading allowed by must be reported to a venue of choice – new reporting venues such as BOAT and Reuters

Best Execution Policy established with very broad parameters

The impact of mifid electronic order books


market share is


Market share

transfers to new



Exchanges not

yet competing


Is regional

The impact of MIFID: Electronic Order Books

The impact of mifid on and off exchange

BATS Europe 1.74%

Turquoise 2.07%

Markit BOAT

  • Market Share of all venues

  • including OTC – Sept 2009

  • New venues take a large share

  • of OTC business

  • Off Exchange business not

  • increasing

SIX Europe 3.23%




The impact of MiFID: On and Off Exchange









LSE Group



Deutsche Borse


Euronext OTC

Source: Reuters Sept 2009

The cost of fragmentation

  • MiFID lowered explicit trading costs but did not address implicit costs

  • There is more information than ever before

  • Information costs money

    • Incumbent Exchanges have not changed data pricing since MiFID, despite losing market share

    • Some Exchanges trying to put up data prices to compensate for loss of revenue in trading

    • Most MTF’s don’t charge for data but ultimately have a strong incentive to monetise it if they can

    • New Venues (e.g. Markit Boat) introduced charges for OTC data

The cost of fragmentation

The precedent for a consolidated tape

The precedent for a consolidated Tape implicit costs


Redistribution of profits

The US has a consolidated Tape - in fact 3 consolidated tapes : A, B, C

Clear best execution rules and a trade through rule exist

Consolidated Tape association established in 1970’s (pre demutualization) to disseminate real time trade and quote information world wide

Exchanges act as Administrators

Tape A for NYSE listed stocks – Administrator NYSE

Tape B for AMEX listed Stocks – Administrator AMEX

Tape C for NASDAQ listed stocks – Administrator NASDAQ



Tape A


Listed Stocks



Contribution made by each platform

Calculates the NBBO



Onward distribution globally

Do we need a Consolidated Tape? implicit costs

Consolidated data for BP on 17 Nov 2008 14:51:52

Source: Equiduct

Do we need a consolidated tape

  • PRE TRADE implicit costs

  • Does everyone know or need to know what’s changed?

  • Large sell sides have created their own consolidated tape in order to assess smart order routing options and achieve optimal execution

  • Buy Side rely on brokers to achieve smart order routing and best ex

  • Broad definition of best execution allows some brokers to continue to execute only on the primary market

  • Market led solutions exist (Reuters, Bloomberg, Equiduct) but you have to pay for the underlying data feeds

  • Currently only paying for the primary incumbent exchange fees

  • Bespoking possible. No standard view – are you looking at the same as me?

Do we need a Consolidated Tape?

Do we need a consolidated tape1

  • POST TRADE implicit costs

  • Market lead solutions exist (Reuters, Bloomberg, Markit Boat, Equiduct) but you have to pay for the underlying data feeds in real time

  • Off Exchange data more fragmented and the value and accuracy of the data is uncertain

    • Does everything get captured?

    • Poorer quality of data and possible double counting

    • Effect of fragmentation has been regional - Most complaints coming from the UK where the biggest change has been felt

    • Hard to support trading decisions

    • What benchmark do you use for TCA?

Do we need a Consolidated Tape?

Key barriers to consolidation without regulation

  • COST implicit costs

    • Exchanges no incentive to reduce cost

    • New providers need to charge but how valuable is their data?

    • Overall costs increase


    • Exchanges bundle their data offering

    • Data vendors bundle their services


    • No one monitoring data across different countries

    • No clear standards and calculations devalues the data


    • Lack of a single clearing house complicates the price/cost

    • Stocks may trade in more than one currency

Key barriers to consolidation without regulation










Are we likely to get regulation

  • Regulators remain silent; may be protecting national interests

  • Fragmentation still seen to be a regional issue

  • Not in the interest of the incumbent exchanges

  • It’s an issue of economics – can financial regulation solve that problem?

  • Closely related to best execution

  • Without regulation you need:

    • Strong supplier management

    • Clear messages to regulators

    • A convergence of accepted standards

Are we likely to get regulation?

Impact of improved data consolidation

  • Better visibility , transparency and execution for all interests

  • Increased cost of capital commitment

  • Continued loss of market share for the incumbent exchanges (NYSE dropped below 30%)

  • Indices forced to change their calculations

  • Ability to better define best execution

  • Improved adoption of smart order routing

  • Cost of data aggregation should go down

Impact of improved data consolidation


  • Significant fragmentation of the market has occurred but the effects have been regionalised

  • The cost of obtaining a consolidated view of the market is greater than it was pre MiFID and the value less certain

  • The US has one tape with clear standards . Europe has several commercial alternatives with no clear standards

  • Post trade data is causing the most problems

  • Cost is a huge barrier to further consolidation

  • Lack of standards and monitoring is a significant issue

  • Regulation similar to the US is unlikely in the near term

  • Many market providers will be losers when data consolidation increases but the end user should be a beneficiary