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MAKING SENSE OF THE MIFIR REVIEW : Creating a market structure that works for issuers and investors
Nick , what are Cboe ’ s views on the EU ’ s consolidated tape proposals ? ND : Our immediate feelings are bittersweet . While we support many aspects of the European Commission ’ s proposal , which recognises that real-time data is essential , rather than 15 minutes delayed or end-of-day , and that mandatory contribution by venues is necessary , we have serious concerns on two fronts .
The first is the lack of ambition by not including pre-trade data at the outset . For the tape to be truly valuable to consumers , it needs to support the enhanced benchmarking of pre-trade decisions , thereby improving investor protection and improving the resilience of European equity markets to technical outages of venues .
Of even more concern is the proposed revenue sharing model for data contributors to the tape , which rewards only regulated markets . Even though pan- European MTFs and approved publication arrangement ( APAs ) would be required to make their data available to the tape provider , they would not be eligible for any revenues generated . Cboe Europe , being the largest pan-
The TRADE speaks with Natan Tiefenbrun , Cboe Europe ’ s head of equities , and Nick Dutton , chief regulatory officer , about the European Commission ’ s recently published Capital Markets Union and MiFIR reform package , including proposals for a European consolidated tape .
European venue and equity APA , publishes around one in every two equity trades in Europe . We would therefore be providing 50 % of the data , but receiving none of the revenues . This highly discriminatory approach would undermine the objectives of CMU by deliberately disadvantaging pan-European venues .
What is the justification for the revenue sharing model the EU has proposed ? ND : The European Commission articulated a desire to support smaller exchanges in EU countries with less developed capital markets . We agree that smaller exchanges need to remain viable businesses and the tape is a great opportunity to package their data alongside that of other markets and expand their audience of potential investors . However , this should not be at the expense of pan-European MTFs . In any case , the proposed text transfers revenues to larger , hugely profitable exchange groups . Any desired subsidy to smaller exchanges must therefore be narrowly targeted to avoid distorting and undermining competition .
There is also an implicit assumption that listing markets perform a “ societal good ” that requires subsidisation . However , most responsibilities for listings have been transferred from exchanges to their supervising regulators . Despite this , exchanges are still amply rewarded for this “ service ” through the initial and
22 // TheTRADE // Winter 2021