The Federation of European Securities Exchanges has highlighted improvements that are still needed in the databases of the European Securities and Markets Authority which are relied upon for regulatory purposes.
FESE said in a position paper last week: “As legislative requirements are highly data dependent, comprehensive data and data quality is essential.”
https://twitter.com/FESEBrussels/status/1148608307055271936
For example, the data is used for transparency calculations, the systematic internaliser thresholds and the transaction reporting regime under MiFID II regulations.
“FESE acknowledges the progress made by Esma in the last 18 months in improving the quality of data provided on their system (FIRDS and FITRS); however, we believe that there is still much room for improvement, without underestimating the work done until now,” added the paper.
One example cited in the paper is that if an instrument is available for trading on multiple markets and one report has incomplete reference data, then the files from other reporting entities are also rejected even if they are correct.
“We would like to suggest that in this case, the reference data from markets reporting complete and accurate data is accepted, regardless of what is reported by other markets,” added FESE. “In addition, if two reporting entities report non-identical data for the same ISIN, the reference data, quantitative data and double volume cap files should be accepted from both.”
In addition FESE has suggested that the market identifier code should be set to the the most relevant market in terms of liquidity rather than the first trading venue that submits the data.
“The last few months have shown that deriving the logic to correctly set the most relevant market in terms of liquidity and most relevant market identifier code s non-trivial,” said the paper. “FESE therefore suggest that Esma establish a review process with the national competent authorities before the most relevant market in terms of liquidity and most relevant MIC is applied to the Esma databases.”
Another issue is that when files are submitted to the Esma databases, it can take several days for accept/reject messages by the reporting entity.
“Overall, we would encourage Esma to strive towards a seamless flow by providing immediate response, but also enrich with a description on how to deal in general with amendments and errors,” FESE added.
FESE also made suggestions with regards to the codes for classifying financial instruments are not being attributed consistently across instruments; difficulties in reporting legal entity identifiers for non-EU issues and implementation of the tick size regime. In particular, FESE wants all transactions executed under waivers to be filtered out of the total turnover executed on a trading venue to accurately reflect liquidity.
“While improvements are still being made by all involved in these data requirements, it is clear that there are still some fundamental points that require further consideration and discussion,” added FESE. “Therefore, we would welcome further engagement on these topics and urge Esma to continue to liaise with market participants on trying to resolve the outstanding issues.”
Esma consultation
Last week Esma launched a consultation on cost of market data in the European Union and the production of a post-trade consolidated tape for the region for equities.
https://twitter.com/ESMAComms/status/1149653699213398021
Steven Maijoor, chair of Esma, said in a statement: “Discussions on the cost of market data in the EU have been to the fore for many years with differing views expressed by trading venues selling this data and market data users buying it - MiFID II aims to change this landscape. Establishing a consolidated tape in the EU has been discussed for many years. I believe it is time to decide if and how we want to go ahead with this ambitious project and Esma is ready to provide support to the co-legislators on the right way forward.”
A previous commercial venture to launch a European consolidated tape, the Coba Project, failed in 2013 due to insufficient support from banks, fund managers, data providers and stock exchanges.
