By John Filar Atwood
In a final report that was 17 months in the making, the International Organization of Securities Commissions (IOSCO) has offered several recommendations to global regulators to consider as they review the regulation of market data. The recommendations address the availability of pre-trade and post-trade data, fair access, and potential consolidation of available data.
IOSCO began looking into market data issues in 2020 in response to concerns raised by its members regarding what data is needed for trading, the uses of market data, and equitable and timely access to the data. The group published a preliminary report in December 2020 and requested feedback and potential solutions to some of these market data concerns. IOSCO received 39 comment letters that it reviewed as part of its preparation of the final report.
As context for the report, IOSCO noted that as secondary markets have evolved to become largely electronic, the market data needs and means to access that data have also changed for many market participants. Even with those changes, market data remains an essential element of efficient price discovery, and market participants need it to make investment, order routing and trading decisions, the group said. Market data also is needed for market participants to comply with various regulatory requirements, including risk management, best execution and order protection rules, IOSCO added.
Recommendations. Based on its review of the issues, and comments received on its draft report, IOSCO developed three recommendations for regulators when reviewing the regulation of market data provided by trading venues or OTC markets. First, IOSCO emphasized the importance of pre-trade data and post-trade data in promoting transparency of trading.
IOSCO said that regulators should 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. It added that regulators should be mindful that the needs of market participants may differ depending on factors such as, participants’ business model, market structure in a particular jurisdiction, or the type of participants in the market.
Fair access. The group’s second recommendation focuses on fair access to data. This may cover issues such as market data pricing, connectivity terms and pricing, and contractual arrangements, IOSCO said. It reminded regulators that market data is not interchangeable in all cases, and where appropriate, helping to ensure fair access across different execution venues is an important consideration. Access to free or delayed data for some participants also may be a useful consideration for regulators, the group noted.
Finally, IOSCO suggested that, where appropriate, regulators should consider whether various pieces of market data can be consolidated. According to IOSCO, consolidation may improve access to market data and may help reduce costs, identify liquidity and compare execution quality in jurisdictions where there may be fragmented liquidity.