Nine banks to build Mifid utility

Nine global securities firms have gone public with plans to create a trade data and market data dissemination platform, to take advantage of the EU’s Markets in Financial Instruments Directive (Mifid) reforms.

Last week, ABN Amro, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, Merrill Lynch, Morgan Stanley and UBS signed a letter of intent and term sheet to gather trade transparency information across Europe.

The consortium is now finalising the selection of a new technology provider to develop the new platform. A request for proposal was sent to service providers in July, and a vendor is expected to be selected next month.

In its first phase, the platform will capture, aggregate, distribute and display pre-trade quotes and post-trade reports for over-the-counter European equity deals, beginning next August. The bank consortium has confirmed that the platform will operate across Europe.

“The consortium has taken the initiative to create a single pre- and post-trade reporting and market data platform on a pan-European basis,” the banks said. The banks also confirmed that “although the initial focus is on the European equity market, the platform will be developed both to meet potential new regulatory requirements and future market demand. This includes opportunities for expanding across the product range.”

In some European markets, such as the UK, securities firms have to report trades conducted OTC to exchanges, which charge a fee to receive this information and then “generate market data revenues from collating and selling this information”, according to the consortium. Other countries do not require this reporting, but this will change with Mifid, which will make reporting of OTC trades a requirement. “This initiative will create an optimum platform that has the ability to scale and evolve to meet the needs of the industry and encourage further competition," the consortium said.

Consortium members will have equal shares in the platform and will retain control of the utility. However, the platform will be opened to other market participants, which will be able to send their data.

Reaction was swift from Dan Kramer, global managing director for institutional equities at Thomson Financial. Kramer says that if the consortium can exploit economies of scale and drive down costs, it will benefit investors.

“The industry needs a low-cost utility in this space, but one capable of continuing to react and develop in response to changing regulatory regimes and market needs," Kramer said.