By Chris Pickles, Co-Chair of FIX Trading Community’s Reference Data Subgroup and Member of the Bloomberg Open Symbology Team
One area where a delay in implementing MiFIR would allow market participants and regulators much needed time to sort out vital details is the area of reference data publication. ESMA has made it clear that, in accordance with MiFIR, it will be publishing reference data for all transaction reportable instruments. Publication will be to everyone, not just to national competent authorities. The reference data is not only fundamental to all business operations, but also to the fundamental business of many organisations.
Some organisations are key hubs for reference data because they allocate domestic identifiers to financial instruments and then add an ISO country code at the front and a check-digit at the end to create an ISIN (International Securities Identification Number). The ISO ISIN standard requires a minimum subset of data fields to be allocated for each instrument – between four and seven fields, depending on the type of instrument. ISO’s principles are that the set of data should be made available on a cost recovery basis. However, ESMA requires exchanges, multilateral trading facilities, organised trading facilities and systematic internalisers to deliver to it a broader subset of reference data per instrument than is specified in the ISIN standard. The extra data is normally liable to fees from the original sources.
ESMA will be publishing all of the data to everyone via its website. In turn, this means that having fees and licences for the data is likely to be out of the question. Why would somebody pay for reference data that they can obtain free of charge and updated daily via the ESMA web site?
Therefore, this seems to be an opportunity for all market participants to review how they obtain and use reference data, how they pay for it and what restrictions exist around it. It is also an opportunity for the hubs in question to review their business models and technical delivery models. Investment firms are likely to be paying today for reference data that will become freely available under MiFIR. They are likely to have contracts in place today that limit their use and redistribution of the data, contracts that they may wish to renegotiate ahead of MiFIR coming into force. Exchanges and other trading venues that have to pay reference data sources for instrument identifiers may find that they don’t need to do that for European Union instruments any more, or for foreign instruments that are traded on European Economic Area trading venues.
Many people in the market have not yet realised that this is already written into MiFIR Level One and into ESMA’s draft technical specifications that were issued in September. Having an international forum in which market participants can meet and discuss these issues on neutral ground is therefore something that would be of considerable value to the financial markets sector. The Reference Data Subgroup of the FIX Trading Community has decided that it wishes to include these business and commercial issues in the areas that its members are addressing, as regulations change business operations and changed business requirements change approaches to managing IT and reference data.