MiFID II, which went live in the European Union at the start of last year, extended best execution requirements from equities into fixed income and mandated new transparency and post-trade reporting in bond markets for the first time.
ICMA said in its latest quarterly report that market participants had been eagerly awaiting more post-trade data due to MiFID II as it can be used in pre-trade decision making, execution counterparty identification and post-trade performance and analysis.
In order to tackle the poor data quality, ICMA created a task force which bought together data experts from a variety of market participants including trading venues and market data providers, the sell side and buy side.
“Currently, post-trade data quality is suboptimal and unusable,” added the association. “ICMA believes that improvements are urgently needed and the best places to start are the database structures within Esma.”
The European Securities and Markets Authority has two databases which “source” bond data quality in the EU – the Financial Instruments Reference Data System and the Financial Instruments Transparency System
“Both of these ‘headwater’ databases impact all downstream bond data, one way or the other,” added ICMA.
At the start of this year, the ICMA task force created a table of the identified data challenges and issues in the two databases and proposed workable solutions to Esma.
Areas identified for improving data quality include the publication times of daily files; inconsistencies in the classification of financial instruments; duplicate records and missing information; and non-equity transparency quantitative data reporting instructions.
“ICMA believes the data quality task force, working together with Esma specialists, will be successful in improving data quality in cash bond markets,” said the report. “There is also a view that these efforts will benefit data quality in other asset classes.”