The prisoner's dilemma is an aspect of href="http://en.wikipedia.org/wiki/Game_theory"

target="_blank">game theory that shows why two

individuals might not agree, even if it appears that

it's best to do so. In its simplest version, two

prisoners have to decide whether to assist or betray one another.

If they co-operate then they both receive relatively light

punishments, whereas a betrayal by one prisoner means that the

other is severely punished whilst the betrayer goes

free.

It seems like a similar situation is

playing out (again) in Europe over the href="http://www.efinancialnews.com/story/2011-09-12/trading-industry-prepares-for-market-data-supply-battle"

target="_blank">consolidated tape. It's a

complicated issue and different industry bodies are naturally

trying to achieve the best outcome for their members. The problem

is that the players concerned have different outcomes in mind.

The exchanges want to protect their market data revenues whilst

the MTFs want to challenge the monopolies of the big boys. The

brokers want lower market data fees and the buy-side wants to be

able to make sense of best execution. Hardly surprising that

progress on finding a way forward has been slow.

But, just as with the prisoner's dilemma, all these

participants need to decide if mutual co-operation is better than

trying to outflank one another. Maybe the only realistic outcome

we can expect is that everyone ends up equally dissatisfied and

there can be no outright winner in this version of the game. A

colleague suggested to me that one thing that would help would be

the imposition of standardised market data contracts. It may

sound like a small point but, in many instances, the legal and

compliance burden of negotiating different market data contracts

with every venue in Europe is often more onerous than actually

doing the technical work. If you think this would make a

difference then click below and I'll forward to

Brussels.

Meanwhile, and after four years, the

European securities industry is still struggling to make sense of

the effectiveness of MiFID as no two measurements of the results

produce the same answer.

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