Mifid data publishers drag feet on Esma guidelines

Four publishers yet to align post-trade data format with Q&A issued eight months ago

  • Since the introduction of the second Markets in Financial Instruments Directive, traders have complained about the accessibility and usability of post-trade data published by approved publication arrangements (APAs) and trading venues.
  • The European Securities and Markets Authority set out a list of practices deployed by APAs and trading venues it deems to be “unacceptable”.
  • Four APAs have not changed the way they publish data, while the same number of APAs and a trading venue have changed their methods.
  • However, new practices adopted by four APAs make it difficult for users to get consolidated information on trades, and traders say it is still difficult to use the data.

Europe’s vast market transparency rules are now more than a year old, but some of the teething troubles have not gone away. Transparency relies on data that was supposed to be provided for free, but some of that data is still inaccessible. Some firms tasked with publishing it are dragging their feet to comply with guidance that was set out more than eight months ago specifically to tackle bad practices. And even where publishers have changed their methods, the data can still be difficult to use.

At the heart of the controversy are approved publication arrangements (APAs), a new type of regulated entity created by the second Markets in Financial Instruments Directive, which went live at the start of 2018. They are supposed to distribute disaggregated post-trade data to the public free of charge 15 minutes after they publish the information in real time to paying subscribers as part of Mifid II’s post-trade transparency rules.

However, from the outset of Mifid II, APAs were deploying various practices that had the effect of preventing users from either accessing or using the free data – pushing them to rely on the paid services instead. Critics complained these practices flouted lawmakers’ original desire to promote transparency.

To resolve the controversy, the European Securities and Markets Authority published a Q&A on post-trade data on May 29, 2018, which condemned certain practices for circumventing the rules on distributing data for free. The practices included deleting data within minutes after publication, not allowing users to copy or download data except via screenshots, requiring users to search by individual instrument codes, or not publishing data at all but instead distributing it only through paid-for vendor solutions.

“The Q&A published by Esma in May made the matter fairly clear and should leave little doubt regarding what APAs have to do in order to provide market data in a way that is in conformity with Mifid II,” says Markus Ferber, the European parliamentary rapporteur for Mifid II, in an emailed statement to Risk.net. “Since the clarifications provided by Esma, more than half a year has passed; I deem that to be a time period that is long enough to ensure that an APA complies.”

Sassan Danesh, a member of the management team at the Derivatives Service Bureau, run by the Association of National Numbering Agencies (Anna DSB), says APAs should have been able to change their systems relatively quickly after the May Q&A.

“Meeting the Esma Q&A requirements requires the provision of basic web pages with relatively standard reference data elements,” says Danesh. “Modern technology platforms are capable of making such changes within a matter of weeks.”

Anna DSB is responsible for generating unique 12-character codes – known as International Securities Identification Numbers (Isin) – for all over-the-counter derivatives that have to be reported under Mifid II.

Danesh adds: “For example, the implementation of the DSB web-based file download service took three weeks. Incorporating new data elements within the site can occur weekly.”

(Very) delayed data

So, are we there yet? Even though more than eight months have elapsed, research by Risk.net has found that four APAs have yet to align the way they publish data with the guidance, including Madrid-based APA BME, Euronext APA, TRADEcho APA and Tradeweb APA (see table at end).

“We found that guidance to be helpful, but we have yet to see it implemented by the trading venues and the APAs,” says a regulatory expert at a buy-side firm. “The guidance is out there and it’s clear but it needs to be enforced. It was published in May 2018, it’s now January 2019 and it’s still not being implemented [by everyone].”

On the other hand, four APAs and a trading venue have explicitly altered the way they publish data in order to comply with the guidance, including: Bloomberg APA; the Chicago Board Options Exchange; Deutsche Borse; TP Icap; and Trax APA. One of those data providers is understood to have updated their website as recently as early February this year.

Risk.net, however, has been unable to access data from Deutsche Borse, as it requires coding to convert the downloaded files into an excel spreadsheet. Deutsche Borse provided instructions, but we can only hope market participants’ coding skills are superior to ours.

BME, Euronext and Tradeweb say they will update their publication practices in line with the Q&A in the future. Risk.net contacted the London Stock Exchange Group – co-owners of TRADEcho APA – but did not receive a response in time for publication of this article.

A spokesperson for BME states: “BME Regulatory Services plans to modify its website in the coming months to make post-trade information available to the public free of charge and with a 15-minute delay after its real-time dissemination. The delayed information that is published on the website free of charge will be the same as that published by market data vendors in real time, in both cases observing every detail of the fields specified in the regulation.”

Markus Ferber
Markus Ferber

Euronext says it has been working with local regulators to meet the requirements since the Q&A was updated on November 14. That update by Esma was to incorporate quote data – known as pre-trade transparency – into its original answer on post-trade data that was published in May. However, the original May Q&A was hardly a closely guarded secret, with Ferber of the European parliament, lawyers, regulators and APAs all commenting on it at the time.

“Euronext does not charge any fees for the use of delayed data (made available 15 minutes after the APA has published it) that users are currently accessing via data vendors,” says a spokesperson at Euronext. “We are working with our regulator to meet the updated requirements communicated by Esma on 14th November 2018 to all market players, providing general direct access to delayed APA data.”

Intriguingly, French markets regulator Autorité des Marchés Financiers (which oversees Euronext) also focuses on the November 14 update to the Q&A, rather than the original May guidance.

“AMF has taken early steps to drive full compliance of Euronext with the regulation taking into account the latest clarifications provided by Esma,” says an AMF spokesperson.

Tradeweb APA made its data available in a format that cannot be copied except by taking screenshots. A spokesperson for the company maintains: “Since its launch, the Tradeweb APA has been making data available to the public for free 15 minutes after the initial publication of the trade report on both a website and in a machine readable format.” However, the spokesperson adds that the firm remains focused on “complying with Mifid II rules as these develop over time. We are therefore closely engaged with regulators as we adapt our offering to meet their evolving requirements, as clarified in the Esma Q&As.”

Back burner

Although Esma does not have any powers to compel APAs to implement the Q&A, national regulators are able to use enforcement powers if they believe an APA is not adequately complying with regulations.

“We are aware that not all APAs and trading venues are complying with the Mifid II requirement to make available data free of charge 15 minutes after publication,” says a spokesperson at Esma. “This is an issue of high priority for Esma and we already issued a Q&A providing further guidance on this issue last year. We are currently following-up on this issue in close cooperation with the national supervisory authorities to ensure that all APAs and trading venues comply with this requirement as soon as possible.”

While AMF supervises the Paris arm of Euronext, the UK’s Financial Conduct Authority is responsible for TRADEcho and Tradeweb, while Spain’s Comision Nacional Del Mercado De Valores oversees the Spanish operations of Euronext and BME.

Tim Cant, a partner at law firm Ashurst, says the FCA is unlikely to apply pressure on APAs to change due to more important priorities taking precedent.

Tim Cant
Tim Cant

“The FCA will consider a number of things before applying any enforcement powers: whether the firm has put its mind to the regulation; whether it has reached its own internal view; how open it has been to the FCA; and how far off the mark it is [from the FCA’s interpretation],” says Cant.

If APAs have clearly made an effort to change their methods to comply with the guidance, but ended up drawing different conclusions on how to achieve that, says Cant, “I suspect you won’t get through to sanctions”. Instead, he thinks the FCA would undertake a thematic review highlighting best and worst practice. “But there seems little appetite to launch one at the minute,” he adds.

Higher priorities for the FCA include: reducing risks from Brexit; ensuring asset managers meet Mifid II’s rules to disclose all costs and charges to prospective investors; and ensuring banks and buy-side firms adhere to new inducement rules.

“The FCA has contributed, with Esma and other EU national competent authorities to a fact-finding exercise on access to transparency data,” says a spokesperson at the FCA. “The purpose of the work was to identify compliance risks and to enhance supervisory convergence. We expect APAs and trading venues to comply with Esma Q&As on access to data. The FCA will continue to work with market participants to ensure their compliance with Esma guidance.” 

A CNMV spokesperson says: “CNMV is monitoring the compliance efforts by a number of Spanish market infrastructures and APAs, to ensure compliance with the regulation, including any technical developments necessary to implement this requirement.”

Wide and woolly

Ashurst’s Cant says the Q&A is open to interpretation as to how APAs and trading venues should publish data, because it does not set out a prescriptive method. The Q&A states broadly what the choice of dissemination should achieve, followed by a list of practices publishers should avoid.

“The Esma Q&A is wide and woolly,” says Cant. “It is not particularly prescriptive. I’m not sure those people trying to radically change market data and the way APAs publish data are going to do so through that Q&A.”

Even among those APAs and trading venues that are now making trade data available freely in a machine readable format, the tendency to upload hundreds of files containing a few trades each is not making life easy for market participants. Bloomberg, CBOE, Deutsche Borse and TP Icap all updated their publishing sites to upload data in this way following the Q&A. BGC has been publishing trade data in this way since before the Q&A was published, at intervals of five minutes.

A brief examination of Deutsche Borse’s website on any given day shows more than 1,000 files from the previous 24 hours, and files are published every minute. Bloomberg publishes files every one to four minutes. TP Icap’s files contain records ranging from one to more than 250 trades, and are uploaded in intervals ranging from seconds to five minutes. However, TP Icap also presents data in a second format that displays the same trades together.

CBOE uploads a file every hour, which is then updated during the course of the next hour to include the latest trades executed 15 minutes earlier.

“If you upload files frequently, then there will be a large number of files, so it is not particularly helpful for users,” says a source at a data publisher.

I’m not sure those people trying to radically change market data and the way APAs publish data are going to do so through that Q&A
Tim Cant, FCA

A source at a second data publisher says they took the decision to distribute trade data in individual files because the DTCC Swap Data Repository – which publishes derivatives trades under Dodd-Frank in the US – does it this way.

At a private conference held in March 2018, sources say the FCA indicated it envisions the way swap data repositories publish data to be suitable for Mifid’s transparency requirements. This way of publishing data is in line with the Q&A as it makes data available for a 24-hour period.

A spokesperson at Deutsche Borse says they do not discuss their own regulatory interpretations with third parties, while a Bloomberg spokesperson says: “Bloomberg APA data is freely available in machine-readable format 15 minutes after a trade is published, on a public webpage which isn't gated. We consider this approach compliant with law, and the objective of ensuring the public can use computer software to directly and automatically read transparency data.”

Fluent in Isin

In addition to the sheer quantity of files, most APAs do not disclose complete descriptions of trades for users to easily identify what each instrument is, instead relying on the 12-character Isins, meaning users have to search databases managed by Anna and Anna DSB for each instrument.

Only Nasdaq and TP Icap identify trades through descriptions and names of instruments.

“The data is in a format which is not easy to read,” says a rates trader at an investment bank. “You wonder whether that’s by design or by accident.”

Critics say APAs are reluctant to provide access to free data and make it usable in order to make the paid-for real-time data they also offer more valuable.

However, APAs also want to prevent vendors from profiting from the free data by creating data-related products. In a Q&A last updated by Esma on November 15, 2017, APAs are allowed to charge fees for data consumed by redistributors which themselves charge for value-added services created from the APAs’ data.

“Some of the people we are hearing from [are saying] they should have access to the data for free in some easy-to-consume way that they will then turn into money for themselves,” says the source at the first data publisher. “It is very clear that is not the case. If you want to do anything commercial with it then you should be paying for the data.”

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