Intriguing news about
our anticipated new trade reporting services, with one of my City
friends asking if Project Boat will float whilst another tells me
Yellow Submarine is already sunk.
Project Boat is the trade
reporting service being launched by Europe’s largest investment banks
in response to MiFID, and was a major news item when it launched last October
with the news that ABN Amro, Citigroup, Credit Suisse, Deutsche Bank,
Goldman Sachs, HSBC, Merrill Lynch, Morgan Stanley and UBS were the
This was followed by news that Markit and Cinnober
would provide the technology for the Boat, and that BT and Colt would
provide the network connectivity.
The last official news update was in June with the headline that Barclays Capital, BNP Paribas, Dresdner Kleinwort, JPMorgan and Royal Bank of Scotland had joined the founding banks.
So we should take this seriously shouldn’t we?
all, over 65% of all of Europe’s tick data will flow through the Boat
with real-time distribution of all of CESR’s liquid share list. Almost
20,000 securities post-trade information will be reported on Boat with
a range of market data vendors providing Boat data including Markit
obviously, but also Bloomberg and Reuters, as you would expect, as well
as Fidessa, IDC, Telekurs, Townsend Analytics, Factset, Thomson and
So we should take this seriously, shouldn’t we?
Except we come to the Validated Trade Reporting (VTR) costs and me-starts to thinks these banks have pitched the pricing wrong.
€120 per month for the VTR data licence plus €5,000 per month for each datafeed.
it may be hard to work this out, but the average operation will be
paying upwards of €300,000 a year for the licences compared with
services from Equiduct, PLUS markets and the existing exchanges that
are a tenth or less.
The question is obvious: with that pricing, will the Boat float?
example, LSE tell me that their average monthly terminal costs will be
about £3.50 compared to £10 from PLUS Markets and £82 from Project
Boat. Seems a bit extreme but, with the latest Boat Pricing I’ve seen,
certainly a six- to eight- times mark-up won’t be far off. For similar
reasons, this may be why the Submarine was sunk.
Submarine has given up the ghost due to a lack of bank support. Now it
could be that the support is going into Boat but methinks that they
have seen the keen attitude of the exchanges to reduce data reporting
costs and are saying that the investment does not warrant the effort.
Boats and Submarines, it sounds like we’re in for Europe’s largest
naval battle since Waterloo … and we all know who won that one don’t
Meanwhile, all of this is on the back of the European
Commission’s latest release of FAQs which included wonderful
illuminations, such as:
"Can a firm be a systematic internaliser for derivatives?
The definition of systematic internaliser (Article 4(1)(7) of the
MiFID) does not make any reference to a specific financial instrument."
This is not the Markets in Equity Instruments Directive as most firms seem to think.
"If I change my best execution policy and do not get agreed sign off from my clients am I breaking MiFID rules?
21(3) second subparagraph of MiFID obliges investment firms to give
their clients appropriate information on the execution policy.
Investment firm must obtain the prior consent of their clients to the
execution policy, so any significant changes to the policy need to be
agreed by clients."
So yes, our paperwork and archiving will
increase as this means every time you do something that is not within
the contractually agreed execution policy, whether under client
instruction or your own internal changes, you must have explicit
agreement recorded and archived in paper or electronic form.
And interesting that some questions are still unanswered such as:
"Are Hedge Funds which are currently unregulated, captured within the MiFID requirements or are they out of scope …"
… no idea in Brussels so far.
You can access the European Commission’s Questions and Answers Paper by rightclicking this link and downloading their 74 page pdf document.