MiFID II, which is anticipated to come into effect on January 3, 2018, will have a far-reaching impact on the financial markets not just in Europe but globally. Included in the new regulations are measures to improve transparency and promote better trading by making market data more accessible. As with any huge change, it’s important to manage expectations. So here are a few high-level points that market participants should keep in mind as they prepare for the new regulatory environment.
- Commencing with the launch of MiFID II, trading venues will offer data a la carte. Nasdaq currently offers market data in one package. To the extent necessary to comply with such regulations, Nasdaq will offer separate, unbundled pre-trade and post-trade data packages for each asset class, which may include equities, derivatives, fixed income and commodities. Customers will be able to choose from the available new packages according to their individual needs and priorities. As such, Nasdaq will be able support customers in their efforts to be MiFID II compliant.
- Segregating data will be complex and costly. Let’s say a customer asks Nasdaq for pre-trade data for equity options in a specific sector and currency. Under the anticipated regulatory requirements, Nasdaq will be obligated to provide that data package continuously during normal trading hours on reasonable commercial terms and on a non-discriminatory basis. However, Nasdaq, like many other trading venues and data vendors, does not have the capability to slice and dice data in this manner. As such, while a customer may believe that licensing a more limited data package will result in a cost savings, the actual savings may be minimal. In fact, our concern is that the requirements for each venue and data licensor to comply with MiFID could ramp up costs for the entire industry.
- The good news is that transparency should improve significantly. New data packages and products combined with more OTC flow coming into the lit markets will enable participants to glean much better market insights. Once the new data reporting services come into full swing, it will be easier for customers to aggregate data across venues – a capability that is sorely lacking today.
- Real savings through netting could offset potentially higher data costs. Nasdaq will continue to extend our leading and affordable netting program and provide customers with direct cost savings in all asset classes.
- Implementation strategies will vary across organizations. The final Regulatory Technical and Implementing Standards (RTS) are scheduled for release in June 2016. Nasdaq has been following the developments of MIFID II closely and is prepared to move forward when the rules come into effect. We have been working diligently internally as well as consulting with key stakeholders to formulate a highly competitive market data offering. Importantly, we are committed to keeping our customers informed once we have more clarity on timing and implementation.
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