EU flags waving in front of European Parliament building. Brussels, Belgium

Citing weaknesses in market transparency, the European Securities and Markets Authority (ESMA) is calling for the development of a consolidated equity tape for European markets, and it’s promising action on market data costs, too.

In a new report, ESMA concludes that recent reforms, known as the Markets in Financial Instruments Directive (MiFID II), haven’t led to lower market data costs nor prompted the creation of a consolidated view of equity trading.

As a result, the regulators are recommending the establishment of a real-time consolidated tape for equities throughout the European Union. And ESMA also said it will provide new guidance on market data costs.

“Transparency is important to ensure that markets are fair, sound and efficient. However, after nearly two years of operating under MiFID II, we are still lacking a reliable view of liquidity across the EU,” said Steven Maijoor, ESMA chair.

“Therefore, we need to establish a real-time consolidated tape for equity instruments to remedy the fragmentation of EU markets [and] create a real single market,” he said.

ESMA acknowledged that the development of a real-time consolidated tape will be “technically demanding,” and require substantial investments and legal changes.

Additionally, the regulators said they intend to address the long-standing industry concern about the cost of market data.

ESMA noted that, while most trading venues maintain that data prices have been stable overall, data users and vendors continue to complain about “excessive fees, complex market data policies and overall higher costs for market data.”

In response, ESMA will be proposing a mix of legislative changes and regulatory guidance to “improve transparency and to ensure that market data is provided on a reasonable commercial basis.”

Said Maijoor: “Access to market data is becoming increasingly important for securities markets, and it is important that data users know what they are paying for.”