On 1 June 2021, the European Securities and Markets Authority (ESMA) published its final Guidelines on the MiFID / MiFIR market data obligations. While non-binding, the Guidelines seek to ensure more harmonised and consistent application across Member States of the relevant MiFID II and MiFIR provisions concerning market data, and in particular the requirement to provide market data on a reasonable commercial basis (RCB) and the requirement to provide market data 15 minutes after publication (delayed data) free of charge. The Guidelines will apply to Member State national competent authorities (NCAs), trading venues, approved publication arrangements (APAs), consolidated tape providers (CTPs) and systematic internalisers (SIs).
ESMA’s guidance is structured into 19 separate guidelines, covering the following topics:
- Clear and easily accessible market data policies: ESMA confirms that market data providers should publish their market data policy in an easily accessible format which is user-friendly on their website, and the policy “should present in clear and unambiguous terms all relevant market data information, including the price list for market data offerings”.
- Provision of market data on the basis of costs: the Guidelines set out that market data providers should have clear and documented cost accounting methodologies for setting the price of market data, explaining whether a margin is included and how that margin has been determined. They should “demonstrate how the price for market data is based on the costs of the production and dissemination of market data”, and by doing so to clearly identify direct costs (i.e. solely attributable to the production and dissemination of market data) and joint costs (i.e. occurring when the processing of a single input resource results simultaneously in two or more different products). The methodologies should include a justification for which costs are included in the fees for market data. Finally, market data providers should only apply penalty clauses in compliance with the principle of charging on an RCB-basis and do “not impose any unjustified or overly onerous penalty clauses”.
- Obligation to provide market data on a non-discriminatory basis: ESMA confirms that market data providers should describe in their market data policy the categories of customers and how the use of data is taken into consideration to set up the categories of customers, based on the criteria provided in the Guidelines. They should also explain how fees are applied when a customer potentially belongs to more than one customer category (eg. when the customer makes different simultaneous uses of the data), and to “clearly display in their market data policies the amount of the increment”. Finally, market data providers should offer to customers who fall within the same category the same set of options with respect to technical arrangements and clearly describe the scope of application of the discount, the conditions for applications, and the terms of its application.
- Per-user fee obligation: ESMA explains that the per-user basis “should be understood as a model of charging fees for display data which enables customers to avoid multiple billing in case market data has been sourced through multiple data providers or subscriptions”. Market data providers should ensure “that the conditions to be qualified as eligible for the per user basis require only what is necessary to make the per user basis feasible”. Finally, market data providers not offering the per user basis arrangements to their customers should “disclose the reasons by clearly indicating the specific features of their business model which make the adoption of the per user basis disproportionate and why these make the adoption of the model unfeasible”.
- Obligation to keep market data unbundled: ESMA confirms that market data providers should always inform customers that the purchase of market data is available separately from additional services, including the provision of data other than pre- and post-trade transparency data.
- Transparency obligations: market data providers should use the standard key terminology as set out in Annex I of the Guidelines in their market data policy and price list, or – if using other terms – to provide their clear definitions. They should also display the price of display data by the number of active users in their market data policy and in the template and to make available to the customer the option to measure access to display data by the number of active users. A standardised publication format should be used, including for cost disclosure. Finally, market data providers should provide all the terms and conditions of their auditing practices in the market data licence agreement.
- Provision of market data free of charge 15 minutes after publication: ESMA confirms that free access to delayed data should be provided to any customer, including professional customers, and such publications should cover all the trading systems operated by trading venues. In addition, delayed data should be provided in a format adapted to the users’ needs, and available for a sufficient period of time, including that the data should be provided in a machine-readable format and available in commonly used programs. Finally, ESMA explains limited instances where data providers may impose a charge for delayed data, eg. a delayed data user re-distributes the delayed data for a fee or creates value-added services using that data which are then sold for a fee to third parties.
The Guidelines will be applicable from 1 January 2022. Separately, the European Commission (Commission) is expected to address the provisions on market data in the upcoming MiFID II and MiFIR review, with legislative proposals expected to be published in Q4 2021. In the course of this review, the Commission might take into account recommendations put forward by ESMA in its December 2019 report on the development of prices in pre- and post-trade market data.