Market transparency

The European Commission and market regulators have indicated that a review of the nature of market transparency in the bonds and derivatives sectors may kick off this autumn, shortly before MiFID is due to be implemented.  Some firms are starting to see potential opportunities in the transparency space.

Traditionally, the local stock exchange has been the collection point for equity data that gets published widely for market transparency.  That has typically been either because of a national concentration rule that forces equity trading onto the exchange, or because of an exchange membership rule forcing member firms to give their equity data to the exchange.  Though MiFID removes the element of “force”, it does not address the issues of market transparency across asset classes other than equities.

Some firms that have started examining what they will do about equity trade reporting have been taking a long, hard look at what data they publish overall, including bonds prices, FX quotes, etc.  They are realising that there is commercial value in their data – value that they are not currently obtaining.  That’s generally because they give away, or “contribute”, their data to data vendors so that the vendors can include it in the products that they sell to their customers.

Only a couple of very large data vendors are set up to gather and publish all of this data, but most of the other data vendors would love to get their hands on it.  Demand exceeds supply.

 If you’re building an engine for equity trade reporting, it doesn’t take that much to beef up the engine to publish prices for bonds, derivatives, FX, etc.  Some firms see that this can help them turn a compliance-related cost into a break-even or small-profit situation

Karl Marx recognised that “Information is power” – and he wasn’t even a capitalist!