MiFID II data disaggregation - be careful what you wish for!

Under MiFID II pre- and post-trade data is required to be made available in an unbundled fashion – ultimately the regulator is aiming to drive down data costs. So where trading venues sell their pre- and post-trade data in the same ‘package’ they will be required to also make it available separately at a reasonable cost. Setting aside the cost discussion, the whole topic of data disaggregation has perhaps slipped under the radar.

In the draft regulatory technical standards (RTS 22) ESMA goes several steps beyond pre- and post-trade data unbundling, including separation by asset class, by instrument, by sector and other criteria subject to customer demand. Asset class alone could dramatically increase the number of products to be offered by exchanges. Splitting out all these data packages, and the resultant administrative overhead, will likely increase costs rather than reduce them. In the absence of common policies and contracts for financial market data across the MiFID region, the management of contractual changes, permissioning, reporting and billing will become even more complex and resource-intensive. The effort required to deliver this degree of change by January 2017 is a concern for those publishing and passing on market data and could also impact those consuming the data. Any change needs to be pragmatic with practical considerations taken into account.

Whilst it’s always good to advocate choice for the customer, the regulators could actually end up making things more confusing and even more expensive.