The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

IOSCO Technology Focused Report Highlights Post-trade Data Fragmentation, Timeliness Issues

Subscribe to our newsletter

Although it is largely focused on the impact of front office technology and developments such as high frequency trading, the International Organisation of Securities Commissions’ (IOSCO) recent consultation report also highlights the need for greater timeliness and transparency into post-trade data. Referencing its recent report on dark liquidity, IOSCO notes that market fragmentation across new venues such as dark pools and developments such as direct electronic access (DEA) have resulted in a number of data related challenges.

“Market fragmentation and the presence of dark liquidity may raise concerns around transparency and the efficiency of the price formation process. For example, competition between trading venues leads naturally to fragmentation of market data as each venue separately publishes the trades that take place on its systems,” states IOSCO in its consultation paper. This has been a common theme during the post-MiFID years, given that opening up the markets to new entrants has meant it is much harder to view consolidated price information.

“Whilst consolidation services exist to integrate the separate data streams, there is a risk that in some jurisdictions some market participants are unable to afford such services and/or the data itself, potentially affecting the price discovery process for these participants. Similarly, the ability to trade on a dark basis may lead to a less efficient price formation process if the level of trading that remains lit is not sufficient to establish a market price that accurately reflects the totality of buyer and seller interest,” notes IOSCO.

In terms of data issues related to direct electronic access, the report suggests that intermediaries should “disclose to market authorities, upon request and in a timely manner, the identity of their DEA customers in order to facilitate market surveillance. In turn, markets should provide their members with access to relevant pre- and post-trade information (on a real-time basis) to enable these firms to implement appropriate monitoring and risk management controls.” The trade and reference data must therefore be in a suitable format and readily accessible in order to meet these real-time requirements.

IOSCO also highlights the need for intermediaries to disclose to market authorities upon request and in a “timely manner” the identity of their DEA customers in order to facilitate market surveillance. Customer and client data must therefore be kept in an easily accessible and consolidated system in order to report this back to the authorities in the required timeframes. This principle is essentially aimed at ensuring that market authorities have the ability to identify the source of orders or trades for market surveillance purposes.

The vast majority of the paper discusses and suggests recommendations for requirements to be introduced for front office, risk management and trading systems. However, in order to meet these reporting requirements there is a need to enhance the underlying data management infrastructures supporting these risk and trading systems.

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: Adverse media screening – how to cut exposure to criminal activity, from money laundering to human trafficking

Screening for adverse media coverage of counterparties presents an incredible opportunity for financial institutions to limit risk exposures and identify bad actors early. It is required by regulations such as the EU’s sixth Anti-Money Laundering Directive (AML 6), and is one of the most effective ways to steer clear of potential connections with sanctioned activity...

BLOG

A-Team Group ESG Handbook 2021 Details Environmental, Social and Governance Investing and Disclosure

A-Team Group has expanded its portfolio of industry-leading publications with the release of ESG Handbook 2021, a guide to Environmental, Social and Governance (ESG) investing, disclosure, and product development. The handbook offers capital markets participants, data vendors and solutions providers extensive coverage of all elements of ESG, from an initial definition and note on why...

EVENT

Data Management Summit Virtual (Redirected)

The Data Management Summit Virtual brings together the global data management community to share lessons learned, best practice guidance and latest innovations to emerge from the recent crisis. Hear from leading data practitioners and innovators from the UK, US and Europe who will share insights into how they are pushing the boundaries with data to deliver value with flexible but resilient data driven strategies.

GUIDE

ESG Handbook 2021

A-Team Group’s ESG Handbook 2021 is a ‘must read’ for all capital markets participants, data vendors and solutions providers involved in Environmental, Social and Governance (ESG) investing and product development. It includes extensive coverage of all elements of ESG, from an initial definition and why ESG is important, to existing and emerging regulations, data challenges...