The Board of the International Organization of Securities Commissions (IOSCO) today published a report that sets out some issues and considerations for regulators when reviewing the regulation of market data.
The Report Market Data in the Secondary Equity Market: Current Issues and Considerationshighlights that market data is an essential element of efficient price discovery and for maintaining fair and efficient markets. Specifically, market data enables market participants to identify liquidity, make informed order routing and investment decisions and comply with regulatory requirements, such as best execution.
As secondary markets have evolved, market data needs have changed and market participants in many jurisdictions have raised concerns about the costs, accessibility, fairness, and consolidation of market data. The Report Market Data in the Secondary Equity Markets published in December 2020 explored these data issues and asked for feedback and potential solutions to some of the concerns raised regarding what data is needed for trading, the uses of market data, fair, equitable and timely access to market data and the consolidation of data.
In this report, IOSCO provides a summary of the comments received and based on these, offers three considerations for regulators when reviewing the regulation of market data provided by trading venues or OTC markets:
- Pre-trade data (i.e., information about orders or quotations) and post-trade data (i.e., information about executions) are important in promoting transparency of trading. As appropriate, it is important to consider the elements of market data that are necessary to facilitate the ability of all market participants to effectively and fairly participate in secondary markets and to make informed investment, order routing and trading decisions. The needs of market participants may differ dependingon factors such as, participants’ business model, market structure in the particular jurisdiction, or the type of participants in the market (retail, institutional, proprietary).
- Fair access to market data is important for providing market data to market participants. Fair access may cover issues including market data pricing, connectivity terms and pricing, and contractual arrangements. Market data is not interchangeable in all cases, and where appropriate, helping to ensure fair access across different execution venues is an important consideration. In addition, the extent to which access to free or delayed data can meet the needs of some participants may be a useful consideration.
- Where appropriate, consolidation may improve access to market data and may, in some circumstances, be useful in helping to reduce its costs, identify liquidity and compare execution quality in jurisdictions where there may be fragmented liquidity.