FPL Releases Data Standards for Post-Trade Transparency

The EMEA Trade Data Standardization Working Group, which was set up by industry standards body FIX Protocol Ltd in 2011 to explore standards for post-trade data, will this week release official guidelines for standardized market data and trade reports that could pave the way for a pan-European consolidated tape.

As part of its review of the Markets in Financial Instruments Directive, dubbed MiFID 2, the European Commission highlighted the need for more transparency in post-trade data. In particular, the EC called for a complete view of European equities markets via the consolidation of post-trade feeds, but progress towards this has been slowed by the lack of common standards and guidelines, FPL officials say.

In response, the working group has spent the last year developing standards for post-trade transparency to meet the requirements of MiFID 2, and has now published its official recommendations following a draft release to members in October.

Jim Kaye, director of product development for European execution services at Bank of America Merrill Lynch and co-chair of the working group, says the standards are split into two main categories—pure data standards around timestamps, venue identification and instrument identification, currency codes and trade conditions; and standards covering the data flow between venues, data vendors and end-user firms.

The recommendations around data standards make extensive reference to the Market Model Typology (MMT), a data standard for normalized trade reporting flags and indicators across European trading venues, proposed by market participants—including the Federation of European Securities Exchanges, potential consolidated tape providers such as Bloomberg, Thomson Reuters and NYSE Technologies, and representatives from buy-side and sell-side firms.

“We are driving the usage of the MMT, as it’s something we want to see adopted. One of the purposes of the FPL paper is to explain under what circumstances you use the various MMT codes,” Kaye says, adding that although the MMT has been largely exchange-led, the goal is to normalize trade flags across OTC trading as well.

Having officially published its recommendations, the group now plans to consult with the European Union’s regulatory community to promote the standards. “We had to make some assumptions in the paper due to ambiguities in MiFID 2—for example, if exchanges automatically qualify as approved publication arrangements [bodies authorized to publish trade reports on behalf of investment firms]—so asking the regulators what they mean will be a useful dialogue,” Kaye says.

The Group has already held informal conversations with UK regulator the Financial Services Authority and the European Securities and Markets Authority—both of which have been “receptive” to the standards—and will send the recommendations to industry groups, including the Association for Financial Markets in Europe and the Investment Management Association to ensure members are engaged, Kaye adds.

Although the industry will not be able to implement some of the standards around trade reporting until MiFID 2 is rolled out in 2014, Kaye expects adoption of other standards—such as the MMT typology—to begin as early as next year. “We are not looking at a radical overall of what’s already there—it’s more of a mapping exercise for the exchanges to get the MMT coding into their market data feeds, but there will be work required to coordinate with market data vendors, who will need to support things like more granular timestamps,” he adds.