Three years ago when people started estimating the impacts and costs of MiFID, the general tendency was to diminish any such estimates as being wildly exaggerated.
One of those estimates was about the potential increase in real-time market data volumes. It now looks like more august experts, including Tower Group, have recognised that there is a sizable challenge to be addressed. I’ve been predicting that – in Europe
- by the end of 2008 there will be about four times as much real-time equities data to deal with as there was at the end of 2006. Tower Group is now saying that there could be 900% more data.
MiFID data won’t boom immediately, but by the end of 2008 it should be pretty much all there. Several factors will cause the increase in data:
- 30-50% of equity trading in Europe is off-exchange, depending on which country we’re talking about, and post-trade prices are not being published in most cases as off-exchange trading is often not permitted in the countries in question (that
doesn’t stop it happening, though).
- off-exchange equity trading is typically quote-driven, rather than order matching, and so we have to take into account pre-trade quotes as well as post-trade prices. At a Nasdaq-like rate of around six quotes per executed trade, 30% times 6 equals
180%, plus the 30% which is the post-trade price for each off-exchange trade - pretty much doubling current market data volumes.
- and then you have to add on the ongoing doubling of market data volumes year-on-year that’s already happening.
Which comes to around four times as much real-time data that has to be dealt with.
So taking that guesstimate against Tower Group’s new estimates – maybe we’ve all been too conservative!