COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT REPORT Accompanying the Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 600/2014 as regards enhancing market data transparency, removing obstacles to the emergence of a consolidated tape, optimising the trading obligations and prohibiting receiving payments for forwarding client orders Proposal for a Directive of the European Parliament and of the Council amending Directive 2014/65/EU on markets in financial instruments
Date: 2021-11-25
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: credit institution, data collection, disclosure of information, financial instrument, financial legislation, financial supervision, financial transaction, investment company, share, trade licence

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  EN 

   EUROPEAN COMMISSION  Brussels, 25.11.2021  SWD(2021) 347 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT REPORT  Accompanying the Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 600/2014 as regards enhancing market data transparency, removing obstacles to the emergence of a consolidated tape, optimising the trading obligations and prohibiting receiving payments for forwarding client orders Proposal for a Directive of the European Parliament and of the Council   amending Directive 2014/65/EU on markets in financial instruments {COM(2021) 726 final} - {COM(2021) 727 final} - {SEC(2021) 573 final} - {SWD(2021) 346 final}  
 
 
Executive Summary Sheet 

Impact  assessment  on  Proposal  for  a  Revision  of  the  Regulation  (EU)  No  600/2014  Markets  in  Financial 
Instruments Regulation (MiFIR)  

A. Need for action 

Why? What is the problem being addressed?  
The MiFIR review tackles three problems that prevail in the Union’s capital markets: (1) liquidity and trade execution 
risk for all capital market participants; (2) high cost in consolidated market data; and (3) the absence of business case 
for  the  consolidation  of  data.  Due  to  the  MiFID  which  opened  to  competition  in  trading  on  financial  instruments  (like 
shares, bonds and derivatives), many platforms now  trade identical  financial instruments. This  makes the  trading  cheaper 
but also scattered across over 400 trading markets across the Union. This fragmentation entails that the market data needed 
by investors to base their trading decisions upon is also scattered. Only the most sophisticated market professionals (high 
frequency traders and major investment banks) have the means to buy. Most ordinary investors and their brokers have 
no comprehensive view of EU trading markets and often take investment decisions based on a partial view of the market.  

What is this initiative expected to achieve?  
Although MiFIR already includes a basic framework for a  consolidated tape (CT or tape), no provider of a  consolidated 
tape  has  emerged  for  any  asset  classes  because  there  is  no  commercial  rewards,  a  need  to  conclude  individual  licensing 
arrangements  and  there  is  insufficient  transaction  data  quality.  The  Commission  intends  to  amend  MiFIR  to  achieve  the 
effective creation of a CT that aims to reduce liquidity and trade execution risk for all market participants. To this end, the 
new framework should aim at improving  market data quality and paving the way for market data consolidation on the one 
hand. It should on the other end facilitate market data licensing and provide a business case of consolidation of market data.  

What is the value added of action at EU level?  
A tape consolidates core market data for a given financial instrument that is traded across several venues in the Union. A CT 
is  therefore  designed  to  increase  transparency  and  confidence  in  the  Union’s  market  and  to  democratise  access  to  core 
market data. Because of the direct applicability across the Union,  the set-up of a tape would be swifter and more efficient 
than if similar initiatives were undertaken on Member State level. 

B. Solutions 

What  legislative  and  non-legislative  policy  options  have  been  considered?  Is  there  a  preferred 
option or not? Why?  
Two sets of options are explored in the report, all accompanied by level 2 measure harmonising the market data fields for 
mandatory contributions for free by all execution platforms that offer trading in or trade in of “reportable securities”. 
1. Options to improve market data quality/facilitate market data consolidation (“consolidation options”) 
Option  1.1 (self-aggregation):  market participants  would be able to  register  with ESMA  as self-aggregators. This  would 
enable them to collect and consolidate market data for their own internal use directly at their own data centre. 
Option 1.2 (competing consolidators): competing market data consolidators registered with ESMA would collect market 
data and consolidate it directly at their subscriber’s data centre (decentralised consolidation) allowing a lower data latency. 
Option 1.3 (exchange-consolidator). EU exchanges for shares or the primary centre of liquidity for bonds and derivatives 
to  consolidate  all  trading  data  pertaining  to  the  securities  they  list  (stock  exchanges  for  shares)  or  for  which  they  are  the 
main centre of liquidity (all other asset classes).  
Option  1.4  (single  consolidator).  The  task  of  consolidation  of  all  market  data  would  be  given  to  a  single  market  data 
consolidator selected by ESMA on the basis of a tender. The CTP would be independent from any of the contributors.  
Option  1.5  (trade  concentration  rule).  This  option  would  not  entail  a  CT,  but  instead  consolidate  trading  in  a  given 
category of financial instrument on a limited set of trading platforms. By consolidating trading, the sources of market data 
are reduced and the need for consolidating data is less urgent or even redundant.  
Option 1.2 and 1.4 of this set are the preferred options: a single or multiple consolidators, coupled with the possibility to 
self-aggregate (option  1.1.), are the most effective in  making post-trade core data available to all market participants in a 
fair and efficient manner, increasing post-trade transparency. ). Option 1.2 enjoys a slight advantage in terms of achieving 
optimal and timely market data quality. On the other hand, Option 1.4 ranks better in granting the opportunity to select as 
consolidator a new market entrant entirely independent from both market data contributors and market data companies.   
2. Options to facilitate market data licensing/create a business case for market data consolidation(‘licensing options’) 
Option 2.1 (no statutory subscription fees). No minimum subscription fees would be required. Consequently, subscription 
fees would be expected to cover only the CTP operating costs not allowing revenues to be distributed to data contributors. 
Option  2.2  (statutory  subscription  fee).  This  option  sets  a  minimum  statutory  subscription  fee  in  order  to  create 
commonality  between  the  consolidator(s)  and  the  contributors  as  there  would  allow  a  revenue  redistribution  to  market 
data contributors. 
Option 2.3 (statutory subscription fee and RPW access fee). This option sets a minimum statutory subscription fee (with 

 
 
revenue redistribution) and incudes an additional usage fee for venues using market data as a reference price. 
Option  2.3  of  this  set  is  the  preferred  option  as  this  not  only  facilitates  more  qualitative  market  data  from  the  data 
contributors but also encourages the market participants to favour lit markets. 

Who supports which option?  
Investors,  alternative  trading  venues,  asset  managers,  banks,  high  frequency  traders  and  national  supervisors  in  general 
support the creation of a consolidated tape operated by an entity independent of the listing exchanges (Options 1.2 and 1.4, 
not Option 1.3). Some retail representation believes the CT will not solve all problems linked to information asymmetries in 
financial  markets.  Incumbent  exchanges  are  sceptical  about  the  creation  of  a  CT,  due  to  potential  revenue  impacts  that  a 
timely  consolidated  tape  might  have  on  their  venue-specific  proprietary  data  products.  Incumbent  stock  exchanges  also 
advocate that ESMA administers or at least supervises the consolidated tape provider to apprehend conflicts of interest.    

C. Impacts of the preferred option 

What are the benefits of the preferred option (if any, otherwise the main ones)?                                        

  Consolidation  options  1.2  and  1.4  would  “democratise”  insights  into  where  the  best  price  and  the  deepest  pool  of 
liquidity  in  any  given  financial  instrument  obtained.  It  would  level  the  playing  field:  a  retail  investor,  its  broker,  a 
trader working  for a small asset  manager or a  major  bank would all have some of the same  market intelligence that 
currently only larger  market makers have.  A CT, provided either by a single provider (option  1.4), or by competing 
providers (option 1.2), would avoid that retail clients and their intermediaries miss out on obtaining the best available 
price for their orders and provide them with a tool to check compliance with the best execution rule.  

  Consolidation Option 1.2 has a slight latency advantage, as the decentralised delivery of data is slightly more accurate 
in terms of latency. Consolidation Option 1.4 provides ESMA with the possibility to award the consolidator role to an 
entirely new entrant. 

  The  monitoring  through  the  tape  will  incentivise  brokers  and  asset  managers  to  actively  seek  to  include  in  their 
portfolios the most optimal instruments and not just those available on the few venues they currently subscribe to.  
  By  providing  a  revenue  allocation  model  that  functions  as  an  economic  incentive  to  channel  trades  to  execution 
protocols that are pre-trade transparent, the CT could increase incentives to provide accurate and timely data using the 
harmonised data format.  This leads to an alignment of incentives between market data contributors and market data 
consolidators, which would also boost confidence in the operation of the Union’s capital market.  

What are the costs of the preferred option (if any, otherwise the main ones)?                                        
Projected operational cost for the provider of a consolidated tape for shares and bonds have been assessed as follows: 

Equity tape costs (annual) 
Build/Setup costs – EUR 0.8-2.4  million/yr 
Running costs – EUR 1.4-5.5 million/yr 
Total – EUR 2.2-7.8 million/yr 

Bond or derivative tape costs (annual) 
Build/Setup costs – EUR 0.16-1.4 million/yr 
Running costs –  EUR 1.3-4 million/yr 
Total – EUR 1.46-5.4 million/yr 

The tape would function under a revenue model from the users, where the tape provider would charge professional users an 
annual “per user” subscription of EUR 100/month. Non-professional users would either pay no fee or a maximum of EUR 
1/month.  Excess  profit  shall  be  redistributed  to  data  contributors.  Estimates  for  an  equity  tape  show  that  annual  total 
revenues  are  estimated  at  approximately  EUR  200  million  depending  on  the  specific  features  of  the  tape.  Subtracting 
average  annual  operating  costs,  that  means  a  total  of  EUR  100  to  150  million  revenue  allocation  could  be  distributed 
among  data  contributors  (for  bonds  and  derivatives,  the  dependence  on  data  revenue  is  less  pronounced,  therefore,  no 
revenue simulation has been conducted for those tapes). 

How will businesses, SMEs and micro-companies be affected?  
Consolidation  options  1.1,  1.2  and  1.4  would  have  the  benefit  that  SMEs  shares  listed  on  only  one  or  a  few  regulated 
markets  or  SME  Growth  Markets  become  visible  to  every  (non-local)  investor  and  broker,  or,  for  option  1.1,  to  self-
aggregators in the Union. This  would increase the attractiveness of investments and the possibilities  of their shares being 
included in investment funds or investment portfolios which would, in turn, increase SMEs’ effectiveness of raising capital. 

Will there be significant impacts on national budgets and administrations?  
There will be  no direct impact on national  budgets. Options 1.2 and  1.4 require  the adoption of  level-2 legislation  for  a 
harmonised data reporting standards. The preferred options will also require supervision and enforcement by ESMA.  

Will there be other significant impacts?   
In terms of social impact, option 1.1, 1.2 and 1.4 would potentially favour the participation to markets from a larger section 
of the population. They would also have impacts of an indirect nature as a consequence of more efficient financial markets. 

D. Follow up 

When will the policy be reviewed?   
A first analysis by ESMA would be provided 24 months after the new rules’ implementation followed by annual updates.