Pickles Unpicks CESR's Level 3 Guidance on MiFID's Data Challenges

The Committee of European Securities Regulators recently issued its Level 3 guidance and recommendations concerning market data challenges resulting from the European Commission's MiFID regulations. Chris Pickles, industry relations manager at BT Radianz and chair of industry body the MiFID Joint Working Group, spoke to Inside Market Data to explain the reasons behind each recommendation.

In the UK, the FSA was saying it wanted to have approved aggregators of data who actually quality check. But there has been some push-back from data vendors, who have said... "We are commercial entities, we're not regulated and we already carry out quality checks on data because… if we sell bad data it reflects badly on our business." They don't want to take on that role as a regulated body. Equally, investment firms themselves have said, "We want to publish data directly to the market, we don't want to go through a third party,"—and MiFID allows that.

So guideline one brings in the principle that… [quality controls] have to start with the source of the data, and it has to be an independent cross-check, but you don't need to go to a third party to do that.

Where people need to eliminate double counting—and that's not everybody—then you need to know where you can go to an original unique source. What's likely to happen, one hopes, is that the identification number used by whoever is the primary source, will continue to be used [throughout the chain]. With guideline two, the idea is that you should at least nominate a primary source so that if you do have an issue around duplicate data, you can [choose to receive data only] from vendors who either get data directly from a primary source or who are themselves a primary source. As a contributor of data, you can have different primary sources for pre- and post-trade data and for different instruments.

An original suggestion to use time stamps wasn't accepted… largely because… time stamps would be one way of identifying something, but there is a principle that you don't use something that has one meaning to identify something else. Time stamps mean time, so they shouldn't be used as an identifier.

We wanted it to [refer to] feeds to propose the idea that it should be pushed out, but the regulators didn't go as far as accepting that. So [what was accepted was] the idea that you could put it on a Web site, but it had to be somewhere you can find it, and in a format known in advance [that is] structured and machine-readable. Ideally, you would do it as a datafeed. If you want to make money from it, you should push it out.

One of the benchmarks in measuring this is likely to be the price of exchange data. With market forces, if your data is unimportant, don't expect people to buy it from you. The opposite extreme is if you are Project Boat and you have the best data in the market, in which case you have a much better negotiating position and can charge what it's worth.