AMAFI – 21-04 – ESMA Consultation

AMAFI / 21-04

11 January 2021

ESMA CONSULTATION PAPER

GUIDELINES ON THE MIFID II/ MIFIR

OBLIGATIONS ON MARKET DATA

AMAFI contribution

Association française des marchés financiers (AMAFI) is the trade organisation working at national, European and international levels to represent financial market participants in France. It acts on behalf of credit institutions, investment firms and trading and post-tradeinfrastructures, regardless of where they operate or where their clients or counterparties are located. AMAFI’s members operate for their own account or for clients in different segments, particularly organised and over-the-countermarkets for equities, fixed-incomeproducts and derivatives, including commodities.

AMAFI welcomes the opportunity to respond to this consultation paper (hereafter the CP) on ESMA’s guidelines on market data.

Before answering the specific questions raised in the CP, AMAFI would like to highlight the following general comments.

AMAFI ■ 13, rue Auber ■ 75009 Paris ■ France

Phone : +33 1 53 83 00 70 ■ http://www.amafi.fr ■ E-mail : info@amafi.fr

AMAFI / 21-04

11 January 2021

GENERAL COMMENTS

ESMA considers that so far MiFID II has not delivered on its objective to reduce the price of market data.

From a user perspective it is observed, a continuing increase in the prices of market data in the EU, despite the introduction by legislators in the MiFID II framework of an obligation to provide data on a reasonable commercial basis (RCB). The observed increase stemmed both from the direct prices charged for data feed by market data providers and the multiplication of indirect costs linked to complex market data agreements and the intensifying need for additional resources to manage and control the use of market data by market participants.

At the same time, ESMA acknowledges that market data plays an increasingly important role in financial markets and that market participants are consuming an increased amount and variety of data, which requires innovations by trading venues and data providers for the infrastructure necessary to provide and use data.

Considering this, AMAFI welcomes ESMA’s consultation paper in that it pursues some clarifications and harmonisations in keeping with the transparency plus approach.

In its response1 to ESMA’s CP of September 2019, AMAFI had made proposals with the goal to improve the enforcement of the RCB principle, notably:

  • An enhanced comparability of pricing lists published by trading venues.
  • A simplification and harmonisation of the fee schedules provided trading venues for their core business on market data
  • A simplification of Market data agreements and a standardisation of their validity period (at least on an annual basis), allowing data users to avoid deploying unnecessary resources.
  • The simplification and harmonisation of audit procedures.
  • The harmonisation of high-level definitions (information/market data, derived data/other original created work/etcetera, display use, non-display use…).

Moreover, AMAFI had raised the issue of the application of the RCB rules to data vendors as highly important for levelling the playing field between market data providers and non-regulated entities. AMAFI is aware that the proposed guidelines will not apply to data vendors but considers that the extension of the RCB rules is still an important issue to be taken into consideration.

AMAFI believes that the regulatory guidance proposed by ESMA in its consultation paper addresses important issues pertaining to the practices of market data providers. Overall, we believe that the clarifications provided for the provision of market data, the obligation to provide market data on a non- discriminatory basis, increased uptake of the per user model and the obligation to keep data unbundled will play an important role in improving the contractual relationship between market data providers and users.

1 “ESMA Consultation paper: MiFID II/MiFIR review report on the development in prices for pre- and post-trade data and on the consolidated tape for equity instruments”, AMAFI / 19-84

AMAFI / 21-04

11 January 2021

Regarding this consultation paper, the main comments voiced by AMAFI are summarised below:

AMAFI’S MAIN COMMENTS

  1. AMAFI proposes to include in ESMA’s regulatory guidance requirements regarding good practices for external auditors. E.g to ensure that payments made to external auditors by market data providers are not correlated to the penalties inflicted on users, and to guarantee that the confidentiality of the data consulted by external auditors is respected.
    1. AMAFI proposes to set a maximal threshold for retroactivity (of 36 months from the audit notification date) and interests (of EONIA rate plus 100 basis points)
  • Fee policy: The overall market data fee schedule should respect RC principles (but i.e. cost based), and, although as a general principle, proportionality of market data fees to the value the data represents should not be the norm, there may be merit in clarifying that customer segmentation should allow to differentiate fees from retail vs professional users for instance
  • Standardised terminology: AMAFI strongly supports the introduction of standardised terminology. However, we believe that some definitions do not reflect the operational reality of market data provision and should be amended in consultation with the industry.
  • Delayed data: AMAFI believes that the use of delayed data should only be charged when a user proceeds to sell market data to other entities (when it provides a service of pure market data provisions). It is thus important to clarify that delayed data when used by customers, notably financial institutions, in the normal course of their activities to serve their own clients is not considered as an added-value service and cannot be charged even if the service (funds administration for instance) provided by financial institutions to their clients is charged.

Finally, AMAFI is aware that ESMA’s efforts to provide regulatory guidance for MiFID II/ MiFIR obligations on market data are strongly linked to the current efforts by the Commission to design a European consolidated tape. AMAFI is concerned that the development in market data prices is misguidedly being taken as a use case for the consolidated tape.

While we believe that there are many purported use cases to a potential consolidated tape in the EU, we also know that those use cases will not be able to cover the market data needs of engaging in algorithmic trading, market makers or other market participants requiring low latency data feeds for their activities.

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AMAFI / 21-04

11 January 2021

ANSWERS

Question 1: What are your views on covering in the Guidelines also market data providers offering market data free of charge for the requirements not explicitly exempted in the Level 2 requirements?

AMAFI believes that the guidelines should cover market data providers offering market data free of charge for certain requirements, notably those pertaining to access to data on a non-discriminatory basis and unbundling of market data.

Question 2: Do you agree with Guideline 1? If not, please justify.

AMAFI broadly agrees with Guideline 1.

Question 3: Do you think ESMA should clarify other aspects of the accounting methodologies for setting up the fees of market data? If yes, please explain.

AMAFI welcomes the clarifications brought by Guideline 2 regarding the fee policies followed by market data providers. However, we believe that those clarifications should be improved to address other key issues pertaining to the auditing practices, particularly in the case where the audits are performed by external entities.

AMAFI is not against the use of external entities by market data providers to perform audit procedures. However, we believe that the contractual ties between market data providers and external auditors should be included in ESMA’s regulatory guidance, notably by:

  • Ensuring that the payments made to these external entities are not correlated to the penalties inflicted on users who are not compliant to the market data agreements. As a matter of fact, we believe that such practices create a strong deterrent for these entities to lead impartial auditing procedures.
  • Ensuring that the external auditors engage in meaningful procedures to guarantee that the data consulted when performing audits for different exchanges remains confidential. For example, it can be suggested that audits for two different exchanges cannot be carried out by the same teams.

We do not believe that additional clarifications should be made regarding other aspects of the accounting methodologies for setting up the fees of market data.

Question 4: With regard to Guideline 2, do you think placing the burden of proof, with respect to non-compliance with the terms of the market data agreement, on data providers can address the issue? Please provide any other comments you may have on Guideline 2.

AMAFI considers that It is up to the data provider to provide evidence that the audited entity has not complied with the rules. Nevertheless, However, the audited entity must cooperate in good faith with the auditor and provide the auditor with all required information.

However, we believe that ESMA should come forward with precise criteria to characterise the overly onerous practices mentioned in Guideline 2. To this end, AMAFI proposes to limit the retroactivity of penalties linked to non-compliance to a maximum of 36 months from the audit notification date. As for excessive interest charging, AMAFI proposes to set the maximum rate authorised at the EONIA rate plus 100 basis points.

Moreover, AMAFI remains interrogative as to the allocation of the penalties collected from users.

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Disclaimer

AMAFI – Association française des marchés financiers published this content on 14 January 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 January 2021 11:15:00 UTC



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