Ref Data to Gain More Ground in MiFID Consultations

While market participants have typically claimed MiFID Review discussions will have limited impact on reference data, this is now slowly starting to change, say industry practitioners.

In December, the Committee of European Securities Regulators (Cesr) released a report with technical advice on the MiFID Review to the European Commission (EC), looking at standardization in over-the-counter derivatives, and the EC released a paper focusing on ongoing financial data-related issues.

The Cesr advice states that data standardization is now regarded as being a preliminary step on the way to introducing organized platform trading of OTC derivatives.

Yet, the main topic in the consultation paper is legal, process and product standardization, and it states that “steps should be taken to increase the proportion of over-the-counter derivatives being standardized by asset class.”

The use of more standardized contracts in this space is expected to have an impact on the back office, but reference data continues to be a secondary agenda item.

Frankfurt-based Rudolf Siebel, managing director, head of market and service, at German investment fund and asset management industry group BVI Bundesverband Investment und Asset Management, says with MiFID discussions traditionally focusing on the front office and trading techniques, the more abstract world of data requirements has been partially left out.

In the MiFID consultation paper, the Comission suggests there is a need to improve the quality and consistency of raw trade data and ensure it is provided in a consistent format to facilitate consolidation; reducing the cost of post-trade data for investors; and introduce a consolidated tape for the EU market.

Netherlands-based Martijn Groot, director of market strategy at Asset Control, says the Mifid review does now appear to be shaping up, and it looks like there is a push to prescribe a format. “The consultation papers are now taking some steps in that direction, so there is now a recognition that one thing is asking the markets to be transparent and open and publish post trade data, and another is to facilitate by prescribing a specific format,” he says, adding that past papers have revealed hesitation at the risk of being too prescriptive and leaving it to the market to lay down the solution.

But while the latest paper does cover reference data and information challenges substantially, Siebel explains it is too early to estimate the full impact it will have on the back office as the industry is still evaluating the content itself.

London-based Martin Sexton, consultant, London Market Systems, says that MiFID focuses on strategic considerations, such as identifying the appropriate body for managing the European consolidated tape. “It raises a number of poignant questions, however it has limited coverage of reference data issues,” he says.

There are some consultation questions relating to the use of client and counterparty identifiers. “Keen on improving harmonization of identifiers, the creation of a common business entity identifier seems paramount,” he says, adding that the only possible oversight is the need to identify key individuals. At present, there is no European-wide identifier for individuals.