Trade data, quantum computing and Libor replacements

The week on, May 26-June 1, 2018

7 days montage 310518

Esma clampdown puts pressure on Mifid data services

Guidance insists data be free and machine-readable, attacking current practices

Podcast: Quantum computing to boom in next three to five years

Quant speaks of collaboration with Nasa and machine-learning algos for yield curves

Libor expert: don’t rely on forward RFR rates for transition

Swaps users should embrace backward-looking risk-free rates instead, says chair of UK working group


COMMENTARY: The letter and the spirit

This week saw a minor but still welcome victory for the European Securities and Markets Authority (Esma), after two months of pressure on the topic of providing trade data. It’s an interesting insight into the attitude of many market participants towards regulation.

Backtrack to 2011. The EU revised its Markets in Financial Instruments Directive (Mifid); the result, Mifid II, was implemented by a regulation called Mifir. One of the requirements covered disclosing trade information: for equity, bond, and derivatives markets, investment firms were ordered to disclose volume, price and time of every transaction they concluded. The information was to be published through an authorised data service – an ‘approved publication arrangement’ or APA; it was to be accessible on commercial terms in real time, in a consistent machine-readable format to allow cross-comparison of different sources, and released free to the public with not more than 15 minutes’ delay.

This appears fairly straightforward in intent, but the various APAs involved dug their heels in on every possible detail. Esma started to catalogue their failures and excuses in March this year. It does not make edifying reading. Tradeweb decided to make it impossible to download the data it provided except by taking screenshots. Bloomberg released the data in two-minute slices; if you failed to download it in those two minutes, the data was deleted and replaced by the next slice. 

The conclusion drawn by many aggrieved users was that this represented grudging compliance in the most irritatingly possible way, to drive users to pay for the premium real-time access that both APAs offer. Bloomberg, on the other hand, asserted that it represented a good-faith attempt to comply with the regulations as fully as possible; few users found this credible.

A investigation also found a good deal of playing around with the definition of “free to the public”; several exchanges decided instead to pass their data to information providers such as Bloomberg, which published it through their (subscription-only) terminals. Some even found lawyers willing to justify this, by saying: “The key thing here is to understand ‘free’ as meaning ‘at no additional cost’, ie, there is no specific additional cost associated with obtaining this information via the terminal. Once you have access to the terminal, then the information is ‘free’” – though none were willing to put their names to this unorthodox line of argument.

Esma disagreed, and it gets to decide. This week it issued new guidance making it clear that “free to the public” meant “anyone can read it without having to pay money” and that the publication should be in usable and machine-readable form, and available for at least 24 hours; all of which should have been obvious from the start to anyone reading the regulations with an eye to their clear intent.



Eurozone banks’ aggregate common equity Tier 1 capital ratio reached 14.2% last year – up from 13% in 2016 and 12.6% in 2015. However, the aggregate for banks in those countries worst affected by the eurozone crisis was far lower, at 12.6%. The aggregate for lenders in countries that escaped the worst of the crisis stood at 15.2%. The respective ratios for 2016 were 11% and 14.2%.



“While I certainly wouldn’t discount default risks, I think some serious investment needs to be done in developing better, more advanced methodologies for non-default risks, and cyber risk in particular” – Jakob von Weizsacker, European Parliament

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